State of Washington61st Legislature2010 Regular Session

By House General Government Appropriations (originally sponsored by Representatives Hasegawa, Green, Kenney, Chase, Hudgins, and Moeller)

READ FIRST TIME 02/09/10.   

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


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 purchasing agencies for the use only of the respective agency, including purchases under chapters 39.29 and 43.105 RCW, the purchasing agency 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 five 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 five percent of the lowest responsible bidder meeting specifications, determined according to rules adopted by the purchasing agency;
     (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)(a) This section applies to a purchasing agency's purchase of goods and services to the maximum extent consistent with international trade agreement commitments and with applicable requirements of federal law. If a purchasing agency 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 suspend the preference granted under this section only to the extent necessary to eliminate the conflict. A finding by one purchasing agency does not affect the application of this section to purchases by another purchasing agency or in another circumstance.
     (b) Rules adopted under this section must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.
     (c) A purchasing agency may suspend the preference granted under this section for purchases made through a multistate contracting consortium, but the suspension is prohibited if it is done for the purpose of avoiding the application of the 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 transact any business 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.
     (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) "Purchasing agencies" are limited to the department of general administration, the department of information services, and the department of transportation.
     (b) "In-state business" means a business that has its principal office located in Washington and its officers domiciled in Washington.
     (c) "Small business" means an in-state 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 as reported on its federal income tax return or its return filed with the department of revenue over the previous three consecutive years; or (ii) is certified under chapter 39.19 RCW.
     (7) Each purchasing agency must, in consultation with each other, adopt rules necessary to implement this section.
     (8) Each December 1st, beginning with a preliminary report on December 1, 2010, the department of general administration, in consultation with the department of information services and the department of transportation, 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, 2010, but before July 1, 2014.
     (10) This section expires December 31, 2014.

NEW SECTION.  Sec. 3   A new section is added to chapter 43.19 RCW to read as follows:
     (1) 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 on the request of the director of general administration, the director of information services, or the secretary of transportation, or their respective designees. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
     (2) This section expires July 1, 2015.

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, with respect to the departments of general administration, information services, and transportation; 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 by the departments of general administration, information services, and transportation 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.))

NEW SECTION.  Sec. 6   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.

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