HOUSE BILL REPORT

SHB 20

BYHouse Committee on State Government (originally sponsored by Representatives H. Sommers, B. Williams, Brekke, Sayan, Holland, Wineberry and Belcher; by request of Legislative Budget Committee)

Revising the office of minority and women's business enterprises.

House Committe on State Government

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (7)

     Signed by Representatives H. Sommers, Chair; Peery, Vice Chair; Baugher, Hankins, O'Brien, Sayan and Walk.

House Staff:Pam Madson (786-7135)

AS PASSED HOUSE FEBRUARY 18, 1987

BACKGROUND:

In 1983 the legislature created the Office of Minority and Women's Business Enterprises (OMWBE).  The office is mandated to develop and maintain a central minority and women's business enterprise certification list for all state agencies and educational institutions.  Businesses seeking certification must file an application with OMWBE to demonstrate that they meet the criteria established by the office.  The criteria includes the element of ownership and excludes any consideration of size.

Certification programs are also administered by the cities of Seattle and Spokane, King County, and METRO.  Currently, all jurisdictions are using the same application form.  Each minority and women-owned business must file a separate application for certification with each jurisdiction.

Current law allows imposition of a civil penalty of up to $1,000 if a person, firm, or union provides false information about compliance; interferes or prevents another's compliance; or commits other statutory violations.  Additionally, the state is provided remedies against a person, firm, corporation, or business that does not comply with the provisions of a contract.  The state may withhold payment; debar, suspend, or terminate the contract; or subject the contractor to civil penalties of 10 percent of the amount of the contract or $5,000, whichever is less.  Repeated violations by a contractor may disqualify the contractor from further participation in state contracting for a period of one year.

The Legislative Budget Committee (LBC) conducted a program and fiscal review of the office and recommended that the schedule for terminating the agency under the Sunset Act be changed to 1995; that OMWBE establish standards governing size of businesses eligible for participation; that authority be given to the state to impose increased sanctions for fraud and abuse; and that OMWBE no longer be required to report economic impact information.

SUMMARY:

Control and size of a business are added as criteria for certification of a minority or woman owned business.  In determining what constitutes a small business, the office shall use the same criteria as the Federal Small Business Act and its implementing regulations.

The state may impose sanctions and fines for misrepresentation and fraudulent conduct.  The office shall follow administrative proceedings before imposing sanctions or fines.  Fines may be imposed in an amount up to ten percent of the contract amount.  A contractor who wilfully and repeatedly violates a contract or any provision of this chapter risks debarment for a period of up to three years.  Agencies or institutions of higher education may pursue other statutory or contractual remedies in addition to those provided in this chapter.

The attorney general may assist in the enforcement of this chapter through use of restraining orders and civil investigative procedures.

The office is no longer required to report to the legislature on the economic impact on the public and private sector of implementing this program.

The office is scheduled for sunset review in 1995.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     (The committee heard testimony on HB 20 and two agency drafts which became SHB 20.)  Ralph Ruff, Office of Minority and Women's Business Enterprises; Representative Jennifer Belcher (primarily for); Pat Thibaudeau, Washington Women United; Dell Jackson, Dell Jackson and Associates; Hank Roney, National Association of Minority Contractors; Doug Peterson, Associated General Contractors; Reverend Levi Baldwin and Falah T. Alhadid, Northwest Minority Contractors (primarily for); and Larry Stevens, National Electrical Contractors Association (primarily for).

House Committee - Testified Against: (The committee heard testimony on HB 20 and two agency drafts which became SHB 20.) Representative Jennifer Belcher (partially opposed); Doug Peterson, Associated General Contractors (partially opposed); Rev. Levi Baldwin and Falah T. Alhadid, Northwest Minority Contractors (partially opposed); and Larry Stevens, National Electrical Contractors Association (partially opposed).

House Committee - Testimony For:     Adding the element of control of the business and size restrictions to the certification criteria will make the state process consistent with other local jurisdictions and the federal Small Business Act.  Size standards will provide the benefits of the program to those businesses that most need assistance.  Increasing the penalty limits will increase the credibility of the program and would help eliminate "front" companies from the program.

House Committee - Testimony Against: A penalty increase is not the most effective way to deter sham or "front" companies.  The current penalty is adequate.  Economic impact information is important and should be included.  Penalties should include criminal penalties and the possibility of jail for violators.  Agencies are not participating and are not meeting the goals set by the office.  If certification is done at a local level, the state office could then concentrate on increasing agency compliance.