BILL REQ. #:  H-1382.1 

READ FIRST TIME 02/10/09.   

     AN ACT Relating to enhancing small business participation in state purchasing; amending RCW 39.29.050 and 43.19.1901; adding a new section to chapter 43.19 RCW; creating a new section; prescribing penalties; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that it is in the state's economic interest and serves a public purpose to promote and facilitate the fullest possible participation by Washington businesses of all sizes in the process by which goods and services are purchased by the state. The legislature further finds that large businesses have the resources to participate fully and effectively in the state's purchasing system, and because of many factors, including economies of scale, the purchasing system tends to create a preference in favor of large businesses and to disadvantage small businesses. The legislature intends, therefore, to assist, to the maximum extent possible, small businesses to participate in order to enhance and preserve competitive enterprise and to ensure that small businesses have a fair opportunity to be awarded contracts or subcontracts for goods and services purchased by the state.

NEW SECTION.  Sec. 2   A new section is added to chapter 43.19 RCW to read as follows:
     (1) To facilitate the participation of small business in the provision of goods and services purchased by the department of general administration for the state, including purchases under chapters 39.29 and 43.105 RCW, the state purchasing and material control director, under the powers granted by RCW 43.19.190 through 43.19.1939, must:
     (a) Apply a preference in the award of contracts for goods and services as follows:
     (i) A preference to small business bidders that is seven percent of the lowest responsible bidder meeting specifications; and
     (ii) A preference to in-state business bidders that are not small businesses but who provide for small business subcontractor participation in the contract that may be up to seven percent of the lowest responsible bidder meeting specifications, determined according to rules adopted by the department of general administration;
     (b) Give assistance to small businesses by:
     (i) Providing technical assistance that would be reasonably expected to mitigate barriers that result from experience requirements related to the contract;
     (ii) Allowing for alternative methods for meeting any inventory level requirements related to the contract; and
     (iii) Assisting small businesses with the qualification application required under RCW 43.19.1908.
     (2) Small business bidders qualified under this chapter shall have precedence over other business bidders so that the application of any bidder preference for which another business bidder may be eligible by law does not result in the denial of the contract award to a small business bidder. This subsection applies if the small business bidder is the lowest responsible bidder, as well as if the small business is eligible for the contract award as the result of the small business bidder preference applied under this section.
     (3) The preferences under subsection (1)(a) of this section may not be awarded to a noncompliant bidder and may not be used to achieve any applicable minimum bidding requirements. The preferences may be used only in evaluating bids or proposals for awards. In no instance may the increase be paid to a bidder whose bid is accepted.
     (4) This section applies to the department of general administration's purchases of goods and services to the maximum extent consistent with international trade agreement commitments.
     (5)(a) A business that is given the preference provided for in this section based on false information, including false information provided or other information withheld, and which by reason of the information has been awarded a contract to which it would not otherwise have been entitled:
     (i) Must pay the state an assessment equal to the difference between the contract amount and what the state's cost would have been if the contract had been properly awarded;
     (ii) In addition to the amount specified in this subsection (5)(a) and except as provided in (b) of this subsection, must pay a civil penalty of ten percent of the amount of the contract involved or one thousand dollars, whichever is less; and
     (iii) Is ineligible to directly or indirectly transact any business with the state for a period of not less than six months and not more than three years, as determined by the director of general administration. This ineligibility shall apply to the principals of the business and any subsequent businesses formed by those principals.
     (b) In addition to being subject to the penalties under (a)(i) and (iii) of this subsection, a business that knowingly and with intent to defraud makes a false statement or fails to provide or conceals, or attempts to conceal, material information for the purpose of obtaining, or aiding another in obtaining, a preference under this section is subject to a civil penalty of ten percent of the amount of the contract involved or ten thousand dollars, whichever is greater.
     (c)(i) A business subject to sanction under this subsection may request, within thirty days of the date of issuance of the notice of sanction, a hearing conducted pursuant to chapter 34.05 RCW.
     (ii) If a business fails to pay an assessment or civil penalty after it has become final and not subject to further appeal, or after the court has entered final judgment in favor of the state, the attorney general may recover the assessment or penalty by action in the appropriate superior court. In such action, the validity and appropriateness of the final order imposing the assessment or penalty shall not be subject to review.
     (6) As used in this section:
     (a) "In-state business" means a business that has its principal office located in Washington and its officers domiciled in Washington.
     (b)(i) "Small business" means an in-state business that certifies, under penalty of perjury, that it:
     (A) Is an independently owned and operated business performing a commercially useful function that is not dominant in its field of operation; and
     (B) Together with affiliates, has fifty or fewer employees and average annual gross receipts of ten million dollars or less over the previous three consecutive years.
     (ii)(A) A small business is deemed to perform a commercially useful function if the business does all of the following:
     (I) Is responsible for the execution of a distinct element of the work of the contract;
     (II) Carries out its obligation by actually performing, managing, or supervising the work involved;
     (III) Performs work that is normal for its business services and functions; and
     (IV) Is not further subcontracting a portion of the work that is greater than that expected to be subcontracted by normal industry practices.
     (B) A contractor, subcontractor, or supplier will not be considered to perform a commercially useful function if the contractor's, subcontractor's, or supplier's role is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of small business participation.
     (7) The department of general administration shall adopt rules necessary to implement this section.
     (8) Each December 1st, beginning with a preliminary report on December 1, 2009, the department of general administration shall report to the governor and the appropriate committees of the legislature on the preference program under this section. Annual reports must include information about the program's progress in increasing the number of small businesses participating in state contracts, the number of contracts under which preferences were given, and the characteristics of small businesses that participated in the program.
     (9) This section applies to contracts awarded on or after November 1, 2009, but before July 1, 2013.
     (10) This section expires December 31, 2013.

Sec. 3   RCW 39.29.050 and 1983 c 120 s 12 are each amended to read as follows:
     All contracts entered into under this chapter ((on or after September 1, 1983,)) are subject to the requirements established under:
     (1) Section 2 of this act, with respect to the department of general administration; and
     (2) On or after September 1, 1983, chapter 39.19 RCW.

Sec. 4   RCW 43.19.1901 and 1987 c 434 s 23 are each amended to read as follows:
     The term "purchase" as used in RCW 43.19.190 through 43.19.200, and as they may hereafter be amended, shall include leasing or renting((: PROVIDED, That)). However, the purchasing, leasing, or renting of electronic data processing equipment shall not be included in the term "purchasing" if and when such transactions are otherwise expressly provided for by law, except that such purchasing, leasing, or renting by the department of general administration is subject to section 2 of this act.
     ((The acquisition of job services and all other services for the family independence program under chapter 74.21 RCW shall not be included in the term "purchasing" under this chapter.))