Eliminate Duplication in Certain Procurement Activities

The General Services Commission should be responsible for all HUB (historically underutilized business) procurement activities.


Background
A disadvantaged business (also known as a historically underutilized business or HUB) is a business in which at least over 51 percent is owned by one or more persons who are socially disadvantaged because of their identification as members of certain groups, including black Americans, Hispanic Americans, women, Asian Pacific Ameri cans and American Indians, who have suffered the effects of discriminatory practices or similar insidious circumstances over which they have no control. 1

The Legislature has recognized the importance of these businesses to the Texas economy. The Legislature outlined in the General Appropriations Act, Article V, Section 106 that all agencies must contract to HUBs a percentage of the money spent equal to HUBs representation in that industry. The Legislature also authorized the Texas Department of Commerce (TDOC) to assist these small and underutilized businesses.

Before 1993, one of TDOC s duties was to certify HUBs for the state purchasing list. The Texas Performance Review (TPR) first identified some problems in July 1991. The purchasing arm of s tate government is not in TDOC but in the General Services Commission (GSC). The efforts of these two agencies were duplicative, and the certification process was cumbersome for HUBs and did not provide any real advantages to them.

In October 1992, TDOC shifted the responsibility for certification to GSC. This eliminated some duplication and improved the certification process. TPR discovered that despite this shift, a program to recruit, develop and report the state s use of HUBs remains a concern. TPR recommended that GSC use available private sector models to develop a strong HUB program that would not produce lengthy, cumbersome and ineffective purchasing specifications. 2 The primary characteristics of the recommended model include involvement by top management in Minority Business Councils, implementing company wide policies to identify and utilize qualified minority vendors, providing company contacts for the businesses , requesting feedback from company departments and offering training to the businesses. These activities not only provide minority businesses with assistance, but they reduce the company s vendor base and allow it to form strategic alliances with vendors; two important goals in procurement.

Although TDOC shifted some of the responsibilities for HUB programs to GSC, it is still responsible for publishing a Directory of Certified Disadvantaged Businesses twice a year. The directory was created to assist state agencies with the development of a comprehensive list of businesses capable of providing materials, supplies, equipment, or services to the state. 3 Since TDOC no longer certifies HUBs, the agency must get its information from GSC. GSC sends TDOC a tape of the current HUBs monthly which the agency uses to print the directory. The agency also downloads these tapes onto Texas Marketplace, TDOC s computerized business information and referral network. GSC provides the same HUB information to agencies on its bid lists.

GSC has a computerized list of HUBs that want to do business with th e state. Agencies must go through GSC bidding process for large purchases (e.g., $1,000 and up). State agencies have been directed by the General Appropriations Act to improve their minority hiring and contracting practices. Therefore, they have incentive to identify HUBs that can meet their contracting needs. More than 130 state agencies already network with GSC and can identify HUBs through this network. The TDOC directory simply duplicates information already collected and available at GSC. TDOC s statute outlines activities that would allow it to participate in state purchasing activities. However, the legislative initiative to increase state agency contracting with small and minority businesses would be better served at GSC since the agency can promote mo re agency participation through its purchasing policies.


Recommendation
The General Services Commission should be responsible for all government historically underutilized business (HUB) procurement activities.

The Directory of Certified Disadvantaged Business should no longer be published by the Texas Department of Commerce. GSC will continue to certify HUBs and provide its comprehensive bid list to agencies. Section 481.105 of the Texas Government Code should be repealed. This will not affect any assistance or advocate duties of TDOC (or its successor agency). This would simp ly give all responsibility for state agency HUB procurement activities to GSC. The two agencies may still work together to achieve their goals.


Implications
Duplication in the area of HUB procurement will be eliminated by this recommendation. Only one agency, GSC, will be responsible for ensuring that the state has a good HUB program, with help from TDOC as needed. The TDOC directory will no longer be published. GSC should stil l provide this information to agencies in the form of bid lists. GSC may still provide the HUB tape to TDOC to include on the Texas Marketplace.


Fiscal Impact
Eliminating TDOC s HUB publication will result in savings. The Legislature should reduce TDOC s appropriations by $100,000 for the 1994-1995 biennium.


Fiscal Savings to the General Change
Year Revenue Fund 001 in FTEs

1994 $50,000 0
1995 50,000 0
1996 50,000 0
1997 50,000 0
1998 50,000 0



Endnotes
1 Tex. Gov. Code Ann. sec. 481.101
2 Comptroller of Public Accounts, State of Texas Reengineered Procurement Process, Texas Performance Review (Austin, Texas, November 24, 1992).
3 Tex. Gov. Code Ann. sec. 481.105.