HOUSE 3rd Reading Unamended April 7, 2014 HOUSE Amended 2nd Reading April 4, 2014Second Regular Session Sixty-ninth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 14-0203.01 Nicole Myers x4326 HOUSE BILL 14-1316 HOUSE SPONSORSHIP Williams and Salazar, Melton, Becker, Buckner, Court, Duran, Exum, Ferrandino, Fields, Fischer, Foote, Garcia, Ginal, Hamner, Hullinghorst, Kagan, Kraft-Tharp, Labuda, Lebsock, Lee, McCann, McLachlan, Moreno, Pabon, Peniston, Pettersen, Rosenthal, Ryden, Schafer, Singer, Tyler, Vigil, Young SENATE SPONSORSHIP Ulibarri and Guzman, House Committees Senate Committees Business, Labor, Economic, & Workforce Development Appropriations A BILL FOR AN ACT Concerning methods to determine whether disparities involving certain historically underutilized businesses exist within the state procurement process, and, in connection therewith, commissioning a study to make such determination, requiring the department of personnel to track contracts awarded to historically underutilized businesses, and making and reducing appropriations. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) In order to ascertain whether disparities exist between the participation of historically underutilized businesses (i.e., businesses owned by racial or ethnic minorities, women, veterans, or persons with disabilities) and other businesses in the state procurement system, the bill directs the department of personnel to contract for a disparity study of the Colorado procurement process and to make recommendations to ameliorate any discrepancies identified by the study. The final report including the findings and recommendations from the study must be provided to the members of the general assembly and the executive director of the department of personnel (executive director) no later than December 1, 2015. The bill directs the executive director to transmit a copy of the final report to the minority business office, which shall post the report on their official web site. In addition, the executive director is required to include the findings and recommendations from the study in its report to the applicable house and senate committees of reference during its hearing pursuant to the "State Measurement for Accountable, Responsive, and Transparent (SMART) Government Act". The executive director is required to develop a method to track the number and percentage of all contracts entered into by all principal departments of the executive branch of state government, institutions of higher education, and the Colorado commission on higher education that are awarded during any calendar year to a historically underutilized business. The executive director is also required to make such information available on the department of personnel's web site. Any entity that is subject to the disparity study is required to respond to a request for information in connection with the study as soon as possible after receiving the request. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add part 9 to article 103 of title 24 as follows: PART 9 PROCUREMENT DISPARITIES STUDY 24-103-901. Legislative declaration. (1) The general assembly hereby finds, determines, and declares that: (a) It is imperative and the public policy of Colorado that the state procurement process be free from bias so that all qualified persons and entities may compete for state business; (b) A fair procurement process not only ensures justice and fairness in state contracting but will broaden the procurement contractor pool, which will result in efficiencies statewide and, as warranted, promote the growth of historically underutilized businesses, thereby creating jobs and stimulating the state's economy; (c) Although studies establishing discrimination in procurement for certain industries or in certain localities have been conducted, a comprehensive analysis of state contracts awarded to historically underutilized businesses has not yet been commissioned; (d) The United States supreme court has recognized that disparity studies are tools that seek to qualify and quantify past discrimination and recommend certain corrective measures as may be warranted by the study's findings, and, pursuant to City of Richmond v. J. A. Croson Co., 488 U.S. 469 (1989), the court established a requirement that any such disparity study be conducted by an independent entity; (e) If any disparities exist, such a study is essential to the ultimate achievement of a marketplace in which historically underutilized businesses are not subject to discrimination and can obtain a fair market share of contract expenditures; and (f) Therefore, it is the intent of the general assembly, consistent with the code's stated policies of ensuring the fair and equitable treatment of persons who deal with the procurement system and fostering effective broad-based competition within the free enterprise system, that an independent study be commissioned to: (I) Determine the frequency with which state contracts are awarded to historically underutilized businesses and the monetary amounts of such awards, compared to the frequency and size of contracts awarded to other businesses; and (II) To the extent that the study establishes that disparities attributable to past or present discrimination exist or inhere in the state procurement process, to recommend remedial measures to address the effects of that discrimination. 24-103-902. Definitions. As used in this part 9, unless the context otherwise requires: (1) "Contract" has the meaning set forth in section 24-101-301 (4) and includes public-private partnerships and other agreements for public-private financing. (2) "Contractor" means any person who is a party to a contract. (3) "Historically underutilized business" means a business: (a) That is at least fifty-one percent owned by one or more individuals who are: (I) United States citizens or permanent resident aliens; and (II) One or more of the following: (A) Members of a racial or ethnic minority group; (B) Non-Hispanic Caucasian women; (C) Veterans of the United States armed forces; (D) Persons with physical or mental disabilities; or (E) Members of the lesbian, gay, bisexual, and transgender community; and (b) For which the minority ownership controls both the management and day-to-day business decisions. (4) "Persons with physical or mental disabilities" means persons who: (a) Have impairments that substantially limit one or more major life activities; (b) Are regarded generally by the community as having a disability; and (c) Whose disabilities substantially limit their abilities to engage in competitive business. (5) "Racial or ethnic minority group" means: (a) African American persons, meaning individuals having origins in any of the black racial groups of Africa; (b) Hispanic American persons, including persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race; (c) Asian American persons, including persons whose origins are from Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Samoa, the United States territories of the Pacific, or the Northern Mariana Islands; or persons whose origins are from subcontinent Asia, including persons whose origins are from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, or Nepal; or (d) Native American persons, including persons who are American Indians, Eskimos, Aleuts, or Hawaiians of Polynesian descent. (6) "Subcontractor" means any person who is a party to a contract with a contractor. 24-103-903. Disparity study - report. (1) (a) The executive director shall commission a state disparity study regarding the participation of historically underutilized businesses in state contracts entered into by all principal departments of the executive branch of state government as specified in section 24-1-110, including any division, office, agency, or other unit created within a principal department and including institutions of higher education and the Colorado commission on higher education; except that the study shall not include those entities that have elected to be exempt from the code pursuant to section 24-101-105 (1) (b). The study shall include state contracts entered into during the 2009-10, 2010-11, 2011-12, 2012-13, and 2013-14 state fiscal years. (b) (I) The study must be conducted, and a final report prepared, by an entity independent of the department that is selected in response to a request for proposal issued in accordance with this code. (II) The entities subject to the study pursuant to paragraph (a) of this subsection (1) shall cooperate fully with the independent contractor engaged to conduct the study. (c) The study and final report setting forth the study's methodologies, findings, and recommendations must be provided by December 1, 2015, to: (I) The members of the general assembly; and (II) The executive director, who shall transmit a copy of the disparity study final report produced pursuant to this section to the director of the minority business office created in section 24-49.5-102, which shall post the report on that office's official web site. (d) The executive director or the executive director's designee shall include the findings and recommendations from the final report required by paragraph (c) of this subsection (1) in its report to the applicable house and senate committees of reference required by the "State Measurement for Accountable, Responsive, and Transparent (SMART) Government Act", part 2 of article 7 of title 2, C.R.S. (2) (a) The purposes of the disparity study undertaken pursuant to this section are: (I) To determine whether there is a disparity between the number of qualified historically underutilized businesses that are ready, willing, and able to perform state contracts for goods and services, and the number of such contractors actually engaged to perform such contracts, which information must be ascertained by evaluating the prime contracts and subcontracts awarded in the following industries: (A) Construction, including new construction, remodeling, renovation, maintenance, demolition and repair of any public structure or building, pipeline construction, and other public improvements; (B) Architecture and engineering, including construction management, landscape architecture, planning, surveying, mapping services, and design, build, and construction services; (C) Professional services, including legal services, accounting, information technology services, medical services, technical services, research planning, and consulting services; (D) Brokerage and investment, including banking, asset management, state retirement, and pension services; and (E) Goods and services that may be provided or performed without professional licensure or special education or training, including goods and services relating to materials, supplies, equipment, maintenance, and food; (II) To determine whether, of the total amount spent on state contracts in a fiscal year, there is a disparity between the percentage of spending attributable to contracts awarded to qualified historically underutilized businesses and the percentage of state contracts that were awarded to historically underutilized businesses in that fiscal year; and (III) To determine what changes, if any, should be made to state policies affecting historically underutilized businesses. (b) The disparity study must specifically include the following analyses, both for the historically underutilized businesses as a group and for each subgroup, as set forth in section 24-103-902 (3) (a) (II): (I) A prime contractor utilization analysis that presents the distribution of prime contracts by industry; (II) A subcontractor utilization analysis that presents the distribution of subcontracts by the industries described in subparagraph (I) of paragraph (a) of this subsection (2); (III) A market area analysis that presents the legal basis for the geographical market area determination and defines the state's market area; (IV) A prime contractor and subcontractor availability analysis that presents the distribution of available businesses in the state's market area; (V) A prime contractor disparity analysis that presents prime contractor utilization compared to prime contractor availability by industry and determines whether the comparison is statistically significant; (VI) A subcontractor disparity analysis that presents subcontractor utilization compared to subcontractor availability by industry and determines whether the comparison is statistically significant; (VII) A qualitative analysis that presents the business community's experiences and perceptions of barriers encountered in contracting or attempting to contract with the state; and (VIII) Recommendations regarding best management practices and ways to enhance Colorado's contracting and procurement activities with historically underutilized businesses. (c) (I) Any conclusion that discrimination-related disparity exists between the availability and utilization of historically underutilized businesses must be supported by statistical evidence and may be supplemented or supported by anecdotal evidence. (II) If the analysis supports a finding that such disparity exists, the report must include recommendations to ameliorate the disparity, including any statutory changes likely to cure, mitigate, or redress such disparity. Any proposed remedial measures must be tailored to address documented statistical disparities in procurement policies. 24-103-904. Contract awards to historically underutilized businesses - tracking. (1) The executive director shall develop a method to track the number and percentage of all contracts entered into by all principal departments of the executive branch of state government as specified in section 24-1-110, including any division, office, agency, other unit created within a principal department, institutions of higher education, and the Colorado commission on higher education, that are awarded during any calendar year to a historically underutilized business. The executive director is not required to track contracts awarded by entities that have elected to be exempt from the code pursuant to section 24-101-105 (1) (b). (2) To allow the executive director to track contracts as required by subsection (1) of this section, the department of personnel may require vendors to identify subcontractors and indirect spending upon request by the department. (3) The executive director shall ensure that data regarding the ownership of the historically underutilized business is available and shall make the data from such tracking available on the department of personnel's web site. (4) The executive director shall begin tracking contracts as required by subsection (1) of this section for new contracts for which the invitation for bids or the request for proposals was issued on or after January 1, 2015. 24-103-905. Requests for information - disparity study. The executive director or the entity that the executive director commissions to conduct a disparity study pursuant to section 24-103-903 may request information in furtherance of the disparity study from each entity that is subject to the study, including each principle department of the executive branch of state government as specified in section 24-1-110, including any division, office, agency, or other unit created within a principle department, and including institutions of higher education and the Colorado commission on higher education; except that such requests may not be made of entities that have elected to be exempt from the code pursuant to section 24-101-105 (1) (b). Each entity that is subject to the disparity study shall respond to any such request for information in furtherance of the disparity study as soon as practicable after receiving the request. SECTION 2. Appropriation - adjustments to 2014 long bill. (1) For the implementation of this act, the general fund appropriation made in the annual general appropriation act to the controlled maintenance trust fund created in section 24-75-302.5 (2) (a), Colorado Revised Statutes, for the fiscal year beginning July 1, 2014, is decreased by $684,420. (2) In addition to any other appropriation, there is hereby appropriated, out of any moneys in the general fund, not otherwise appropriated, to the department of personnel, for the fiscal year beginning July 1, 2014, the sum of $684,420 and 0.5 FTE, or so much thereof as may be necessary, to be allocated to the division of accounts and control controller, state purchasing office, for the implementation of this act as follows: (a) $29,242 and 0.5 FTE for personal services; (b) $5,178 for operating expenses; and (c) $650,000 for vendor contract expenses. SECTION 3. Effective date. This act takes effect July 1, 2014. SECTION 4. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.