BILL REQ. #: H-1136.1
State of Washington | 62nd Legislature | 2011 Regular Session |
Read first time 02/01/11. Referred to Committee on State Government & Tribal Affairs.
AN ACT Relating to enhancing small business participation in state purchasing; amending RCW 39.29.050, 43.19.1901, and 43.19.1905; adding new sections to chapter 43.19 RCW; creating new sections; and prescribing penalties.
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 to 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, and all state purchasing agencies, including educational
institutions, operating under delegated authority granted under RCW
43.19.190 or 28B.10.029, must apply a bidding preference in the
purchase of goods and services as follows:
(a)(i) Apply a five percent bidding preference to the bids of in-state small businesses; and
(ii) Apply a bidding preference that may be up to five percent, as
determined under rules adopted by the state purchasing and material
control director, to the bids of in-state businesses that are not small
businesses but that provide for small business subcontractor
participation in the contract;
(b) Give assistance to small businesses by providing opportunities
for the agency to answer vendor questions about the bid solicitation
requirements in advance of the bid due date and, upon request after the
contract award, for the agency to hold a debriefing to assist the
vendor in understanding how to improve his or her responses for future
competitive procurements.
(2) The preferences provided for under subsection (1) of this
section may not be awarded to a noncompliant bidder and may not be used
to achieve any applicable minimum bidding requirements.
(3) A purchasing agency that, in good faith, awards a procurement
contract based on a bidding preference provided for in this section is
not liable in any cause of action for damages arising out of the
contract award. A purchasing agency prevailing on the good faith
defense provided in this subsection is entitled to recover expenses and
reasonable attorneys' fees incurred in establishing the defense. For
the purposes of this subsection, the purchasing agency is entitled to
rely on the certification made by a business under penalty of perjury
as to its qualifications as a small business.
(4)(a) This section applies to the state's purchase of goods and
services to the maximum extent consistent with international trade
agreement commitments and with applicable requirements of federal law.
If the state purchasing and material control director determines that
compliance with this section may conflict with international trade
agreement commitments or with federal requirements that are a
prescribed condition to the allocation of federal funds to the state or
if such compliance would otherwise conflict with federal law, the
purchasing agency shall not apply the bidding preference provided under
this section only to the extent necessary to eliminate the conflict.
A finding by the director with regard to one purchasing agency does not
affect the application of this section to purchases by another
purchasing agency or in another circumstance.
(b) A purchasing agency may not use its authority under RCW
43.19.190(2) to avoid applying the bidding preference required under
this section.
(c) As authorized under rules adopted by the state purchasing and
material control director, a purchasing agency may determine that the
bidding preference provided for under this section is not applicable to
purchases made through a multistate contracting consortium or under the
interlocal cooperation act, but such action is prohibited if it is
taken solely to avoid applying the bidding preference required under
this section.
(5)(a) A business that is given the preference provided for in this
section based on false information provided or on material information
withheld and, which by reason of the information or lack thereof, 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 submit bids or
proposals for any new contracts with the state for a period of not less
than six months and not more than three years, as determined under
criteria adopted by the affected purchasing agency. This ineligibility
shall apply to the principals of the business and any subsequent
businesses formed by those principals. The affected purchasing agency
may also without penalty or cost to the state terminate, prior to
expiration, any existing contract with 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.
(d) Civil penalties collected under (a)(ii) and (b) of this
subsection must be deposited in the small business bidding preference
account created in section 3 of this act.
(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) "Percent bidding preference" means the percent by which an in-state business's responsive bid is allowed to exceed the lowest
responsive bid submitted by a responsible bidder who is not an in-state
business and have the in-state business be awarded the contract.
(c) "Small business" means a business, including a sole
proprietorship, corporation, partnership, or other legal entity, that:
(i) Certifies, under penalty of perjury, that it is owned and operated
independently from all other businesses and has either (A) fifty or
fewer employees, or (B) a gross revenue of less than seven million
dollars annually averaged over the previous three consecutive years as
reported on its federal income tax returns or its returns filed with
the Washington state department of revenue; or (ii) is certified under
chapter 39.19 RCW.
(7) Each December 1st, beginning with a preliminary report on
December 1, 2011, the department of general administration shall report
to the governor and the appropriate committees of the legislature on
the bidding 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
and dollar amounts of contracts awarded under which bidding preferences
were given, and the basic demographic characteristics, including the
number of employment positions in Washington, of businesses that bid or
were awarded contracts under the bidding preference program.
(8) State agencies and institutions of higher education affected by
this section must adopt rules deemed necessary by the executive head of
the agency or its board, as applicable, to implement this section.
(9) This section applies to contracts awarded on or after November
1, 2011.
NEW SECTION. Sec. 3 A new section is added to chapter 43.19 RCW
to read as follows:
The small business bidding preference account is created in the
custody of the state treasurer. All receipts from civil penalties
collected under section 2 of this act must be deposited into the
account. Expenditures from the account may be used only toward
defraying the costs of adjudications that occur under section 2 of this
act. Only the director of the office of financial management or the
director's designee may authorize expenditures from the account. The
account is subject to allotment procedures under chapter 43.88 RCW, but
an appropriation is not required for expenditures.
Sec. 4 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; and
(2) On or after September 1, 1983, chapter 39.19 RCW.
Sec. 5 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
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.))
Sec. 6 RCW 43.19.1905 and 2009 c 486 s 10 are each amended to
read as follows:
(1) The director of general administration shall establish overall
state policy for compliance by all state agencies, including
educational institutions, regarding the following purchasing and
material control functions:
(a) Development of a state commodity coding system, including
common stock numbers for items maintained in stores for reissue;
(b) Determination where consolidations, closures, or additions of
stores operated by state agencies and educational institutions should
be initiated;
(c) Institution of standard criteria for determination of when and
where an item in the state supply system should be stocked;
(d) Establishment of stock levels to be maintained in state stores,
and formulation of standards for replenishment of stock;
(e) Formulation of an overall distribution and redistribution
system for stock items which establishes sources of supply support for
all agencies, including interagency supply support;
(f) Determination of what function data processing equipment,
including remote terminals, shall perform in statewide purchasing and
material control for improvement of service and promotion of economy;
(g) Standardization of records and forms used statewide for supply
system activities involving purchasing, receiving, inspecting, storing,
requisitioning, and issuing functions, including a standard
notification form for state agencies to report cost-effective direct
purchases, which shall at least identify the price of the goods as
available through the division of purchasing, the price of the goods as
available from the alternative source, the total savings, and the
signature of the notifying agency's director or the director's
designee;
(h) Screening of supplies, material, and equipment excess to the
requirements of one agency for overall state need before sale as
surplus;
(i) Establishment of warehouse operation and storage standards to
achieve uniform, effective, and economical stores operations;
(j) Establishment of time limit standards for the issuing of
material in store and for processing requisitions requiring purchase;
(k) Formulation of criteria for determining when centralized rather
than decentralized purchasing shall be used to obtain maximum benefit
of volume buying of identical or similar items, including procurement
from federal supply sources;
(l) Development of criteria for use of leased, rather than state
owned, warehouse space based on relative cost and accessibility;
(m) Institution of standard criteria for purchase and placement of
state furnished materials, carpeting, furniture, fixtures, and nonfixed
equipment, in newly constructed or renovated state buildings;
(n) Determination of how transportation costs incurred by the state
for materials, supplies, services, and equipment can be reduced by
improved freight and traffic coordination and control;
(o) Establishment of a formal certification program for state
employees who are authorized to perform purchasing functions as agents
for the state under the provisions of chapter 43.19 RCW;
(p) Development of performance measures for the reduction of total
overall expense for material, supplies, equipment, and services used
each biennium by the state;
(q) Establishment of a standard system for all state organizations
to record and report dollar savings and cost avoidance which are
attributable to the establishment and implementation of improved
purchasing and material control procedures;
(r) Development of procedures for mutual and voluntary cooperation
between state agencies, including educational institutions, and
political subdivisions for exchange of purchasing and material control
services;
(s) Resolution of all other purchasing and material matters which
require the establishment of overall statewide policy for effective and
economical supply management;
(t) Development of guidelines and criteria for the purchase of
vehicles, high gas mileage vehicles, alternate vehicle fuels and
systems, equipment, and materials that reduce overall energy-related
costs and energy use by the state, including investigations into all
opportunities to aggregate the purchasing of clean technologies by
state and local governments, and including the requirement that new
passenger vehicles purchased by the state meet the minimum standards
for passenger automobile fuel economy established by the United States
secretary of transportation pursuant to the energy policy and
conservation act (15 U.S.C. Sec. 2002);
(u) Development of goals for state use of recycled or
environmentally preferable products through specifications for products
and services, processes for requests for proposals and requests for
qualifications, contractor selection, and contract negotiations;
(v) Development of procurement procedures and policies implementing
the bidding preference program provided for in section 2 of this act,
with model bidding application documents that include, at a minimum,
basic demographic information about the business, including the number
of employment positions in Washington.
(w) Development of procurement policies and procedures, such as
unbundled contracting and subcontracting, that encourage and facilitate
the purchase of products and services by state agencies and
institutions from Washington small businesses to the maximum extent
practicable and consistent with international trade agreement
commitments;
(((w))) (x) Development of food procurement procedures and
materials that encourage and facilitate the purchase of Washington
grown food by state agencies and institutions to the maximum extent
practicable and consistent with international trade agreement
commitments; and
(((x))) (y) Development of policies requiring all food contracts to
include a plan to maximize to the extent practicable and consistent
with international trade agreement commitments the availability of
Washington grown food purchased through the contract.
(2) The department of general administration shall convene a
working group including representatives of the office of financial
management, the department of information services, and the state
printer. The purpose of the working group is to work collaboratively
to develop common policies and procedures that encourage and facilitate
state government purchases from Washington small businesses, as
required in subsection (1)(((v))) (w) of this section, and in RCW
39.29.065, 43.78.110, and 43.105.041(1)(j). By December 1, 2009, these
central services agencies shall jointly provide a written progress
report to the governor and legislature on actions taken and planned,
barriers identified, and solutions recommended to reach this goal.
(3) The definitions in this subsection apply throughout this
section and RCW 43.19.1908.
(a) "Common vendor registration and bid notification system" has
the definition in RCW 39.29.006.
(b) "Small business" has the definition in RCW 39.29.006.
(c) "Washington grown" has the definition in RCW 15.64.060.
NEW SECTION. Sec. 7 If any part of this act is found to be in
conflict with federal requirements that are a prescribed condition to
the allocation of federal funds to the state, the conflicting part of
this act is inoperative solely to the extent of the conflict and with
respect to the agencies directly affected, and this finding does not
affect the operation of the remainder of this act in its application to
the agencies concerned. Rules adopted under this act must meet federal
requirements that are a necessary condition to the receipt of federal
funds by the state.
NEW SECTION. Sec. 8 If any provision of this act or its
application to any person or circumstance is held invalid, the
remainder of the act or the application of the provision to other
persons or circumstances is not affected.