PRINTER'S NO. 1274
No. 1149 Session of 1981
INTRODUCED BY RICHARDSON, IRVIS, MANDERINO, EVANS,
J. D. WILLIAMS, OLIVER, WIGGINS, PENDLETON, DEAL, LEVIN AND
WOZNIAK, APRIL 7, 1981
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, APRIL 7, 1981
AN ACT
1 Declaring a policy of the Commonwealth with regard to minority
2 and small business concerns, creating the Minority and Small
3 Business Procurement Council, providing for the operation of
4 the council, establishing a small business set-aside,
5 establishing a procedure for the solicitation of bids and
6 providing for an annual report to the Governor and General
7 Assembly.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title.
11 This act shall be known and may be cited as the "Minority and
12 Small Business Procurement Act."
13 Section 2. Findings and declarations of policy.
14 It is hereby determined and declared as a matter of
15 legislative finding that:
16 (1) The promotion of economic development is a
17 legitimate and necessary governmental function.
18 (2) The existence of a healthy free enterprise system is
19 directly related to the well-being and strength of small and
20 minority business concerns and their opportunities for free
1 entry into business and for growth and expansion.
2 (3) Experience in administering the equal opportunity
3 provisions of the law has shown that many discriminatory
4 practices of the past years have remained so deeply embedded
5 in basic institutions of society, industry and government
6 that these practices continue to have extremely unequal
7 effect on individuals and groups, even when those who make
8 the decisions have no conscious intent to discriminate.
9 (4) There currently exists in the Commonwealth a
10 situation where an inequitably small share of State contracts
11 are awarded to small and minority business concerns and that
12 such conditions are chronic and of long-standing.
13 (5) Without remedial measures there is no prospect for
14 improvement.
15 (6) The present and prospective health, safety, morals
16 and general welfare of the Commonwealth require as a public
17 purpose the development and encouragement of small and
18 minority business concerns, furnishing property and services
19 to the Commonwealth.
20 Therefore it is hereby declared to be a policy of the
21 Commonwealth of Pennsylvania to insure that a fair proportion of
22 all the Commonwealth's contracts for property and services be
23 placed with minority and small business concerns. Such policy is
24 hereby declared to be a public purpose.
25 Section 3. Definitions.
26 The following words and phrases when used in this act shall
27 have, unless the context clearly indicates otherwise, the
28 meanings given to them in this section:
29 "Affiliate or subsidiary of a business dominant in its field
30 of operation." A business of which 20% or more is owned or of
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1 which its controlling interest is controlled by a business
2 dominant in that field of operation, or is owned by partners,
3 officers, directors, majority shareholders or their equivalent
4 of a business dominant in that field of operation.
5 "Business set-aside." That percentage of each State contract
6 or package of contracts, determined by the council, for which
7 bids are to be solicited only from minority and small
8 businesses.
9 (1) "Total set-aside." Bids for the entire contract are
10 to be solicited only from minority and small businesses.
11 (2) "Partial set-aside." A portion of the contract,
12 determined by the council, where bids will only be solicited
13 from minority and small businesses.
14 "Commonwealth contract." Any agreement, purchase order or
15 arrangement or modification thereof between the Commonwealth or
16 any State contracting agency, and any person to be paid in whole
17 or in part, directly or indirectly, by public funds or in kind
18 contributions from the Commonwealth.
19 "Commonwealth contractor." Any contractor, supplier, vendor
20 or other person who, through a contract or other arrangement,
21 has received, is to receive or is receiving public funds or, in
22 kind, contributions from the Commonwealth and shall include any
23 subcontractor who performs under a State contract.
24 "Council." The Minority and Small Business Procurement
25 Council.
26 "Department." Any department, agency, commission, authority,
27 establishment or other instrumentality of the Commonwealth and
28 any wholly or partially owned government corporation which
29 enters into contracts.
30 "Dominant in its field of operation." Exercising a
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1 controlling or a major influence in a business activity in which
2 a number of businesses are engaged.
3 "Minority." An individual who is a citizen of the United
4 States who is Black, Hispanic, Asian-American, American-Indian,
5 Eskimo, Aleut or female.
6 "Minority business." A business that is owned and positively
7 controlled by one or more minority persons in this State. For
8 the purpose of this definition:
9 (1) "Owned." A business which is:
10 (i) A sole proprietorship legitimately owned by an
11 individual who is a minority person.
12 (ii) A partnership or joint venture positively
13 controlled by minority persons and in which at least 51%
14 of the beneficial ownership interests legitimately are
15 held by minority persons.
16 (iii) A corporation or other entity controlled by
17 minority persons and in which at least 51% of the voting
18 interests and 51% of the beneficial interests
19 legitimately are held by minority persons.
20 (2) "Positive control." The exclusive or ultimate and
21 sole power to decide, determine and administer all major
22 affairs of the business, including but not limited to,
23 capital investment and all other financial matters, property
24 acquisition, contract negotiation, legal matters, officer-
25 director-employee selection and comprehensive hiring,
26 operating responsibility, cost control matters, income and
27 dividend matters, financial transactions, rights of other
28 shareholders or joint partners.
29 "Person." Shall include any natural person, corporation,
30 partnership, unincorporated association, State or local
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1 government, and any agency, commission, authority, board or
2 other instrumentality or political subdivision of such a
3 government.
4 "Procurement." The system and practice of soliciting bids on
5 State contracts.
6 "Small business." A business entity including a sole
7 proprietorship, partnership, corporation, joint venture,
8 association or cooperative which has its principal place of
9 business in this State and which is not dominant in its field of
10 operation and is not an affiliate or subsidiary of a business
11 dominant in its field of operation. In determining whether a
12 business qualifies under this definition of small business
13 pursuant to this act, the Minority and Small Business
14 Procurement Council, created by this act, shall ensure that
15 departments promulgate rules according to guidelines established
16 by the council for the determination of business size
17 limitations. When computing size status, annual sales and
18 receipts of a business and all of its affiliates, the maximum
19 number of employees and the maximum dollar volume which a small
20 or minority business may have under the rules promulgated by the
21 council may vary from industry to industry to the extent
22 necessary to reflect differing characteristics of such industry,
23 subject to the following presumptions:
24 (1) no wholesale business is a small business if it
25 employs more than 20 persons and its annual sales and
26 receipts for its more recently completed fiscal year exceeds
27 $4,000,000;
28 (2) no retail business or business selling services is a
29 small business if it employs more than 40 persons and its
30 annual sales and receipts exceed $1,000,000;
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1 (3) no manufacturing business is a small business if it
2 employs more than 60 persons and its annual sales and
3 receipts exceed $4,000,000; and
4 (4) no construction business is a small business if its
5 annual receipts exceed $2,000,000.
6 The above limitations shall exclude the amount of any pending
7 bids in the determination of size. The presumptions of this
8 clause shall not prohibit the council from developing guidelines
9 which permit a department to promulgate rules and regulations in
10 compliance with this act, which define small business using
11 criteria different from those contained in these presumptions.
12 Section 4. Creation of Minority and Small Business Procurement
13 Council; powers and duties.
14 (a) A Minority and Small Business Procurement Council is
15 established, which shall consist of the State Office of Minority
16 Business Enterprise in the Department of Commerce, to promulgate
17 rules and regulations consistent with this act which it deems
18 necessary for its proper administration.
19 (b) The members of the council shall receive no compensation
20 for their services as members, but shall be entitled to
21 reimbursement for all necessary expenses incurred in connection
22 with the performance of their duties as members.
23 (c) The council shall operate in accordance with the
24 following:
25 (1) Procurements shall be set aside for exclusive small
26 and minority business participation if it can be determined
27 that there is a reasonable expectation that bids and offers
28 will be obtained from a sufficient number of business
29 concerns so that awards will be made at reasonable prices on
30 a competitive basis. Also, partial set-asides of total
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1 procurement requirements will be considered and applied where
2 that criterion for total set-asides is not met, but where the
3 procurement is economically severable into two or more parts,
4 and where it is anticipated that one or more small firms has
5 the technical competency and productive capacity to furnish a
6 severable portion of the procurement at a reasonable price.
7 When three or more qualified minority contractors or
8 suppliers are on the bidder's list and upon their responding
9 to a solicitation, indicate an intent to quote, nonminority
10 small business enterprises need not be solicited.
11 (2) All set-aside designations, total or partial, shall
12 be made prior to the solicitation for bids and offers as
13 required by law. The solicitation shall identify the small
14 business size standard, and require each bidder/offeror to
15 identify his size (large or small) pursuant to that standard.
16 If there is a conflict with other policies, this act and
17 rules promulgated under this act shall govern. Where Federal
18 money is used, Federal law shall apply, if acceptance of the
19 money is conditioned upon the utilization of small and
20 minority businesses. All procurements purchased by the State
21 using Federal funding shall be governed by the percentage or
22 goal for minority participation designated by the Federal
23 agency granting the funds.
24 (3) The council, when bonding is required, shall set the
25 amount of bonds or securities on a business set-aside. No
26 agency or department of the State involved in purchasing
27 goods or services, may require bid performance and payment
28 bonds to be posted if the contract price is less than
29 $25,000, unless such bonds are required by Federal law or
30 regulation, or as a condition to Federal assistance. The
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1 amount of these bonds shall not be greater than:
2 (i) Bid bond - shall not be greater than 10% of the
3 total bid.
4 (ii) Performance bond - shall not be greater than
5 50% of the total bid price of work.
6 (iii) Labor and material bond - may be for the full
7 amount of labor and materials.
8 (4) The council, with the explicit approval of the
9 department or other instrumentality of the Commonwealth
10 involved, may waive all bond requirements for a particular
11 business set-aside.
12 (5) To alleviate the cash flow difficulties that arise
13 from present payment practices which penalize those small and
14 minority firms whose cash flow is negatively affected by
15 extended payment of receivables, the council shall be
16 empowered to require and enforce the following payment
17 practices:
18 (i) Once a contract has been let through the
19 provisions of this act and the delivery pursuant thereto
20 of goods and services made, the purchasing entity shall
21 make or authorize the immediate payment of 15% of the
22 total dollar value of such contract.
23 (ii) When the delivery of goods and services are to
24 extend beyond the period of 30 days, the purchasing
25 entity shall devise payment schedules that will allow for
26 immediate payment of 15% of the total contract price upon
27 completion of 15% of the contracted service or upon
28 receipt of 15% of the contracted goods.
29 (iii) The above payment practices will take effect
30 only after it has been determined that such goods and
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1 services have been provided in accordance with the
2 provisions of the contract and to the satisfaction of the
3 purchasing entity.
4 (6) The council shall have the responsibility to
5 designate as a business set-aside, a portion of all purchases
6 and contracts made by each executive department including
7 those services rendered and furnished by registered
8 professionals, such as, but not limited to, accountants,
9 attorneys, medical doctors, architects, dentists and
10 engineers.
11 (7) The council may establish an organized support
12 system as they see fit for recommendations of legislation or
13 for offering assistance to minority and small businesses to
14 encompass monitoring, reporting, delegation of
15 responsibilities between individuals and departments,
16 sensitizing procurement personnel to the needs of the
17 businesses, education for prospective bidders, legal
18 enlightenment for small and minority businesses regarding the
19 program and such other functions to encourage responsible
20 participation in the program as the council shall see fit.
21 (8) The council shall require that each department or
22 other instrumentality of the Commonwealth authorized to
23 contract for buildings, highways, commodities, equipment,
24 supplies or services make known and report to the council all
25 information pertinent to anticipated procurement needs at the
26 beginning of each fiscal year and each fiscal quarter
27 thereafter. Each department or other instrumentality shall
28 submit this information to council not less than 30 days
29 after the beginning of the fiscal year and not less than 15
30 days before the beginning of each fiscal quarter. This
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1 procurement information shall include but not be limited to
2 the total amount budgeted to contract for securing goods and
3 services, the nature and anticipated cost of each contract,
4 and the payment account from which the payment funds will be
5 drawn i.e. Federal grants, the Commonwealth of Pennsylvania
6 General Fund, special appropriations, departmental
7 allocations, etc. During the course of each operating year
8 the council shall designate no less than 10% of the total
9 dollar amount or number of such contracts as small and
10 minority set-asides unless it can be determined that this
11 minimum percentage is unattainable due to unavailability of
12 competent, responsible small and minority businesses.
13 Section 5. Small business set-aside; advertisement;
14 cancellation.
15 (a) Each department or other instrumentality of the
16 Commonwealth authorized to contract for buildings, highways,
17 commodities, equipment supplies or services, shall upon
18 designation of a business set-aside as determined by the
19 council, include in the advertisement for bids in the
20 Pennsylvania Bulletin and other media used to solicit bids, such
21 designation.
22 (b) In the case of contracts designated as a business set-
23 aside, invitations to bid shall be confined to small and
24 minority businesses and bids from other businesses shall be
25 rejected. The contract shall be awarded to the lowest
26 responsible bidder among such businesses in accordance with the
27 rules and regulations for purchasing promulgated by the council.
28 Awarding of contracts to businesses under this act is subject to
29 all other statutes governing State procurement and all rules
30 promulgated thereunder, including 16 Pa. Code Chapter 49
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1 (relating to contract compliance), as now or hereafter amended,
2 except as altered by this act and the regulations promulgated in
3 its administration.
4 (c) In the event the department or other instrumentality of
5 the Commonwealth soliciting a bid, feels that responsive
6 competitive bids at reasonable prices were not obtained as a
7 result of the business set-aside solicitation, or that bids
8 thereof were received only from firms demonstrated to be not
9 responsible, (or prequalified), the set-aside may be cancelled
10 by the council and may be readvertised on an unrestricted basis.
11 Section 6. Solicitation of bids.
12 The department or other instrumentality of the Commonwealth
13 referred to in section 5 shall be responsible for carrying out
14 the policies of this act, and to the extent consistent with the
15 best interests of the Commonwealth:
16 (1) attempt to locate additional qualified small and
17 minority business suppliers by all appropriate methods,
18 particularly where only a limited number of small and
19 minority business concerns are on bidders' lists;
20 (2) give wide publicity to Commonwealth purchasing
21 procedures;
22 (3) publicize proposed procurements by use of advance
23 notices or other appropriate methods;
24 (4) include all established and qualified potential
25 business suppliers on the bidders' mailing lists;
26 (5) send solicitations to all firms on the appropriate
27 list, except that where less than a complete list is to be
28 used, at least a pro rata number of small and minority
29 business concerns shall be solicited; and
30 (6) where feasible, divide proposed procurement of
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1 supplies and services so as to:
2 (i) permit bidding on quantities relative to the
3 capability and capacity of the qualified business
4 entrepreneur;
5 (ii) permit the maximum time practicable for
6 preparation and submission of bids, proposals or
7 quotations; and
8 (iii) permit and establish delivery schedules and
9 payment procedures which will encourage qualified
10 business participation.
11 Section 7. Annual report.
12 The council shall make an annual report of operations to the
13 General Assembly and the Governor within 90 days after the end
14 of each fiscal year. It is intended that the report indicate the
15 progress being made toward achieving the objectives of this act,
16 particularly an evaluation of the implementation of the State
17 minority and small business procurement policies during the
18 preceding fiscal year. The council's report shall recommend any
19 amendments to this act which, in their opinion, the council
20 finds necessary and proper to fulfill the original legislative
21 intent of the act. The report shall identify businesses within
22 this State which have done business or which have expressed
23 interest in doing business, or are capable of doing business
24 with the State for the preceding fiscal year according to:
25 (1) the types of goods purchased, services provided and
26 construction and maintenance contracts awarded;
27 (2) the number of businesses within each category
28 determined to be a small business and a business dominant in
29 its field of operation and the criteria used to determine a
30 business as a small business or a business dominant in its
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1 field within each category;
2 (3) the number of small businesses within each category
3 of which more than 50% of the voting shares or interest is
4 held by individuals who are female or is owned or controlled
5 by a female or partners, officers or directors, the majority
6 of whom are female; and
7 (4) the reporting data shall also include figures
8 quantifying contract awards to small firms which resulted
9 from business set-asides (both total and partial) and the
10 number of defaults or failures experienced by such firms
11 which were awarded set-asides under this act.
12 Section 8. Penalties.
13 If any department or individual fails to comply with the
14 provisions of this act or with the regulations of the council,
15 the council is empowered to go to the Commonwealth Court for a
16 judicial order to enforce compliance. Intentional violations of
17 the act or of the council's regulations shall also result in a
18 fine of $500 to be paid to the credit of the council.
19 Section 9. Sunset provisions.
20 The provisions of this act shall expire ten years after the
21 effective date hereof unless extended by specific reenactment of
22 the General Assembly.
23 Section 10. Effective date.
24 This act shall take effect immediately.
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