WSR 04-08-093

PERMANENT RULES

OFFICE OF MINORITY AND

WOMEN'S BUSINESS ENTERPRISE

[ Filed April 6, 2004, 1:59 p.m. ]

Date of Adoption: April 6, 2004.

Purpose: Add procedures for implementation of chapter 39.19 RCW related to the addition of socially and economically disadvantaged business enterprises (SEDBE) to the state certification program as requested by the 56th legislature in Joint Memorial 8015. The addition allows OMEBE to include businesses that are owned and controlled by persons with disabilities to be certified without fiscal impact.

Citation of Existing Rules Affected by this Order: Amending WAC 326-02-010, 326-02-030, 326-02-040, 326-02-045, 326-07-030, 326-20-010, 326-20-050, 326-20-070, 326-20-080, 326-20-110, 326-20-120, 326-20-160, 326-20-173, and 326-20-180.

Statutory Authority for Adoption: RCW 39.19.030 and 39.19.120.

Adopted under notice filed as WSR 04-02-043 on January 5, 2004.

Changes Other than Editing from Proposed to Adopted Version: Retain "deputy director" as part of WAC 326-07-030(2). Add example of "persons with disabilities" to WAC 326-02-030(34).

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 4, Amended 14, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
Effective Date of Rule: Thirty-one days after filing.

April 6, 2004

Carolyn Crowson

Director

OTS-6897.2


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-02-010   Purpose.   The purpose and intent of chapter 120, Laws of 1983, and of Title 326 WAC is to provide the maximum practicable opportunity for increased participation by minority ((and)), women, and socially and economically disadvantaged-owned and controlled businesses in public works and the process by which goods and services are procured by state agencies and educational institutions from the private sector. This purpose will be accomplished by encouraging the full use of existing minority ((and)), women, and socially and economically disadvantaged-owned and controlled businesses and the entry of new and diversified minority ((and)), women, and socially and economically disadvantaged-owned and controlled businesses into the marketplace. These rules shall be applied and interpreted to promote this purpose.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-02-010, filed 5/11/92, effective 6/11/92. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-02-010, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 96-24-085, filed 12/3/96, effective 1/3/97)

WAC 326-02-030   Definitions.   Words and terms used in this title shall have the same meaning as each has under chapter 120, Laws of 1983, unless otherwise specifically provided in this title, or the context in which they are used clearly indicates that they should be given some other meaning.

(1) "Advisory committee" means the advisory committee on minority ((and)), women(('s)), and socially and economically disadvantaged individual's business enterprises.

(2) "Broker" means a person that provides a bona fide service, such as professional, technical, consultant, brokerage, or managerial services and assistance in the procurement of essential personnel, facilities, equipment, materials, or supplies required for performance of a contract.

(3) "Certified business" or "certified" means a business or the status of a business that has been examined by the Washington state office of minority and women's business enterprises and deemed to be a minority business enterprise (MBE), a women's business enterprise (WBE), a minority woman's business enterprise (MWBE), ((or)) a combination business enterprise (CBE), or socially and economically disadvantaged business enterprise (SEDBE).

(4) "Class of contract basis" means an entire group of contracts having a common characteristic. Examples include, but are not limited to, personal service contracts, public works contracts, leases, purchasing contracts, and contracts for specific types of goods and/or services.

(5) "Combination business enterprise" or "CBE" means a small business concern organized for profit, performing a commercially useful function, that is fifty percent owned and controlled by one or more minority men or MBEs certified by the office and fifty percent owned and controlled by one or more nonminority women or WBEs certified by the office. The owners must be United States citizens or lawful permanent residents.

(6) "Commercially useful function" means the performance of real and actual services which are integral and necessary in the discharge of any contractual endeavor, and not solely for the purpose of obtaining certification or obtaining credit for participation goal attainment.

(7) "Common industry practices" means those usages, customs, or practices which are ordinary, normal, or prevalent among businesses, trades, or industries of similar types engaged in similar work in similar situations in the community.

(8) "Conduit" means a certified business which agrees to be named as a subcontractor on a contract in which such certified business does not perform the work but, rather, the work is performed by the prime contractor, prime consultant, material supplier, purchasing contractor, or any other noncertified business.

(9) "Contract" means a mutually binding legal relationship (including a purchase order, lease, or any modification thereof), which obligates the seller to furnish goods or services (including construction), and the buyer to pay for them.

(10) "Contract by contract basis" means a single contract within a specific class of contracts.

(11) "Contractor" means a party who enters into a contract directly with a state agency or educational institution.

(12) "Corporate-sponsored dealership" means a business that does not meet the requirements for certification but is participating in a program specifically developed by a national or regional corporation to address the present-day issue of lack of opportunities for minorities or women in the dealership industry.

(13) "Director" means the director of the office of minority and women's business enterprises.

(14) "Economically disadvantaged individuals" means socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.

(15) "Educational institutions" means the state universities, the regional universities, The Evergreen State College, and the community colleges.

(((15))) (16) "Front" means a business which purports to be eligible for certification but is not in fact legitimately owned and controlled by minorities, women, socially and economically disadvantaged individuals, or a combination thereof.

(((16))) (17) "Goods and/or services" means all goods and services, including professional services.

(((17))) (18) "Graduation" means the business is no longer certified because it is no longer a small business concern.

(19) "Heavy construction" means construction other than building construction; e.g., highway or street, sewer and pipeline, railroad, communication and power line, flood control, irrigation, marine, etc.

(((18))) (20) "Joint venture" means a partnership of two or more persons or businesses created to carry out a single business enterprise for profit, for which purpose they combine their capital, efforts, skills, knowledge or property and in which they exercise control and share in profits and losses in proportion to their contribution to the enterprise.

(((19))) (21) "Legitimately owned and controlled" means that minorities, women, socially and economically disadvantaged individuals, or a combination thereof, own at least fifty-one percent interest in the business (unless the business qualifies as a corporate sponsored dealership under the provisions of subsection (12) of this section and WAC 326-20-050(4)); and the minorities, women, socially and economically disadvantaged individuals, or combination thereof, possess and exercise sufficient expertise specifically in the firm's field of operation to make decisions governing the long-term direction and the day-to-day operations of the firm.

(((20))) (22) "Manufacturer" means a business which owns, operates, or maintains a factory or establishment that produces or creates goods from raw materials or substantially alters goods before reselling them.

(((21))) (23) "Minority" means a person who is a citizen or lawful permanent resident of the United States and who is:

(a) Black: Having origins in any of the black racial groups of Africa;

(b) Hispanic: Of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race;

(c) Asian American: Having origins in any of the original peoples of the Far East, Southeast Asia, the Indian subcontinent, or the Pacific Islands; or

(d) American Indian or Alaskan Native: Having origins in any of the original peoples of North America.

(((22))) (24) "Minority business enterprise," "minority-owned business enterprise," or "MBE" means a small business concern, organized for profit, performing a commercially useful function, which is legitimately owned and controlled by one or more minority individuals or minority business enterprises certified by the office. The minority owners must be United States citizens or lawful permanent residents.

(((23))) (25) "Minority women's business enterprise" or "MWBE" means a small-business concern, organized for profit, performing a commercially useful function, which is legitimately owned and controlled by one or more minority women and is certified by the office. The owners must be United States citizens or lawful permanent residents.

(((24))) (26) "Office" means the office of minority and women's business enterprises of the state of Washington.

(((25))) (27) "Pass-through" means a certified business which buys goods from a noncertified business and simply resells those goods to the state, state contractors or other persons doing business with the state for the purpose of allowing those goods to be counted towards fulfillment of WBE or MBE goals.

(((26))) (28) "Person" means one or more individuals, partnerships, associations, organizations, corporations, cooperatives, legal representatives, trustees and receivers, or any group of persons.

(((27))) (29) "Personal net worth" means the socially and economically disadvantaged individual's net personal assets and liabilities, excluding an individual's ownership interest in the applicant firm and the individual's equity in his or her primary residence. If the statement of personal net worth that an individual submits shows that the individual's personal net worth exceeds seven hundred fifty thousand dollars, the individual's economic disadvantage is rebutted.

(30) "Procurement" means the purchase, lease, or rental of any goods or services.

(((28))) (31) "Public works" means all work, including construction, highway and ferry construction, alteration, repair, or improvement other than ordinary maintenance, which a state agency or educational institution is authorized or required by law to undertake.

(((29))) (32) "Regular dealer" means a certified business that owns, operates, or maintains a store, warehouse or other establishment in which the materials or supplies required for the performance of the contract are bought, kept in stock, and regularly sold to the public in the usual course of business.

(((30))) (33) "Services((,))" in the context of "goods and/or services," means all services including, but not limited to, client services, personal services, and purchased services as defined in RCW 39.29.006.

(((31))) (34) "Socially disadvantaged individuals" means those individuals who have been subjected to racial or ethnic prejudice or cultural bias, gender, disability, long-term residence in an isolated environment, or other similar causes negatively impacting entry into or advancement in the business world within American society because of their identities as members of groups and without regard to their individual qualities. Social disadvantage must stem from circumstances beyond their control.

(35) "Socially and economically disadvantaged business enterprise" or "SEDBE" means a small-business concern, organized for profit, performing a commercially useful function, which is legitimately owned and controlled by one or more socially and economically disadvantaged individuals or socially and economically disadvantaged business enterprises certified by the office. The socially and economically disadvantaged owners must be United States citizens or lawful permanent residents.

(36) "Socially and economically disadvantaged individual" means a person who is a citizen or lawful permanent resident of the United States and who is:

(a) Found to be a socially and economically disadvantaged individual on a case-by-case basis by OMWBE; or

(b) A member of one of the following groups that are presumed to be socially and economically disadvantaged:

(i) Minority;

(ii) Women;

(iii) Any additional groups whose members are designated as socially and economically disadvantaged by the U.S. Small Business Administration (SBA), at such time as the SBA designation becomes effective.

(37) "State agency" includes the state of Washington and all agencies, departments, offices, divisions, boards, commissions, and correctional and other types of institutions. "State agency" does not include the judicial or legislative branches of government except to the extent that procurement or public works for these branches is performed by a state agency.

(((32))) (38) "Subcontractor" means a party that indirectly provides goods or services, including but not limited to construction, to a state agency or educational institution through a contractor.

(((33))) (39) "Supplier" means a manufacturer or regular dealer that:

(a) Provides or furnishes goods or materials;

(b) Performs a commercially useful function; and

(c) Is not considered a conduit, front, pass-through or broker.

(((34))) (40) "Switch business" means a business which was previously owned and controlled by a man, men or nonminorities, or individuals who are not socially and economically disadvantaged, which has made technical changes to its business structure so that it is now purportedly owned and controlled by a woman or women or by a minority person or persons, or by a socially and economically disadvantaged individual or individuals, but continues to operate in substantially the same manner as it did prior to the written revisions of the business structure.

(((35))) (41) "Women's business enterprise," "women-owned business enterprise," or "WBE" means a small business concern, organized for profit, performing a commercially useful function, which is legitimately owned and controlled by one or more women or women's business enterprises certified by the office. The women owners must be United States citizens or lawful permanent residents.

[Statutory Authority: RCW 39.19.030(7). 96-24-085, 326-02-030, filed 12/3/96, effective 1/3/97. Statutory Authority: RCW 39.19.030. 94-11-116, 326-02-030, filed 5/18/94, effective 6/18/94. Statutory Authority: RCW 39.19.030(7). 92-24-107, 326-02-030, filed 12/2/92, effective 1/2/93; 92-11-007, 326-02-030, filed 5/11/92, effective 6/11/92; 89-24-047, 326-02-030, filed 12/1/89, effective 1/1/90. Statutory Authority: Chapter 39.19 RCW. 88-12-060 (Order 88-5), 326-02-030, filed 5/31/88; 88-08-031 (Order 88-4), 326-02-030, filed 4/1/88; 87-18-030 (Order 87-6), 326-02-030, filed 8/27/87; 86-17-018 (Order 86-2), 326-02-030, filed 8/11/86; 85-14-101 (Order 85-6), 326-02-030, filed 7/2/85; 84-09-002 (Order 84-5), 326-02-030, filed 4/5/84. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-02-030, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-02-040   Prohibited activities with regard to chapter 39.19 RCW.   (1) RCW 39.19.080 makes it unlawful for a person, firm, corporation, business, union, or other organization to:

(a) Prevent or interfere with a contractor's or subcontractor's compliance with this chapter, or any rule adopted under this chapter;

(b) Submit false or fraudulent information to the state concerning compliance with this chapter or any such rule;

(c) Fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain certification as a minority ((or)), women(('s)), or socially and economically disadvantaged individual's business enterprise for the purpose of this chapter;

(d) Knowingly make a false statement, whether by affidavit, verified statement, report, or other representation, to a state official or employee for the purpose of influencing the certification or denial of certification of any entity as a minority ((or)), women(('s)), or socially and economically disadvantaged individual's business enterprise;

(e) Knowingly obstruct, impede, or attempt to obstruct or impede any state official or employee who is investigating the qualification of a business entity that has requested certification as a minority ((or)), women(('s)), or socially and economically disadvantaged individual's business enterprise;

(f) Fraudulently obtain, attempt to obtain, or aid another person in fraudulently obtaining or attempting to obtain public moneys to which the person is not entitled under this chapter;

(g) Knowingly make false statements that any entity is or is not certified as a minority ((or)), women(('s)), or socially and economically disadvantaged individual's business enterprise for purposes of obtaining a contract governed by this chapter;

(h) To fail or refuse to comply with any provision of chapter 39.19 RCW or with a contract requirement established under this chapter.

(2) A certified business engages in prohibited activity when it fails to perform a commercially useful function on any public-sector contract or procurement. Failure to perform a commercially useful function occurs when a business:

(a) Functions as a conduit; or

(b) Functions as a pass-through; except brokers and firms operating in industries where such activity is common industry practice, e.g., insurance or real estate.

(3) A business that is deemed to be a switch business is also deemed to have engaged in prohibited activity.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-02-040, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-22-017 (Order 88-9), 326-02-040, filed 10/24/88.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-02-045   Factors considered in determining performance of commercially useful function.   (1) In determining the performance of a commercially useful function, factors which may be considered include, but are not limited to, the following:

(a) Whether the work to be performed by the business is within the scope of work included in the Standard Industrial Classification code(s) under which the business is listed in the directory of certified businesses published by the office or in the records of the office.

(b) Whether the business could be considered a conduit, front, or pass-through;

(c) Whether the minority and/or woman and/or socially and economically disadvantaged individual owner(s) has the skill and expertise to perform the work for which the business is being or has been certified;

(d) Whether the business is or will be responsible for executing a distinct element of work in the performance of a contract; and the principals or employees of the business actually perform, manage, and supervise the work for which the business is or will be responsible;

(2) In addition, a business that functions as a supplier shall:

(a) Be the manufacturer of the goods or materials or assume the actual and contractual responsibility for furnishing the goods or materials and execute material changes in the configuration of those goods or materials; or

(b) Prior to submitting an application for certification, secure a contract or distributor agreement with a manufacturer to act as an independent authorized representative capable of passing on product warranties to the purchaser.

(3) Factors which may indicate that a supplier is not performing a commercially useful function include, but are not limited to, the following:

(a) A minimum amount of inventory is not maintained.

(b) Billing and shipping arrangements are performed by nonowners or staff of nonowners.

(c) A significant amount of deliveries are shipped directly from the producer or manufacturer to the end user.

(d) The firm does not take ownership of the product.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-02-045, filed 5/11/92, effective 6/11/92.]

OTS-6898.2


AMENDATORY SECTION(Amending WSR 92-24-107, filed 12/2/92, effective 1/2/93)

WAC 326-07-030   Description of office organization.   (1) The office is located at 406 South Water Street, Olympia, Washington 98504.

(2) The office consists of a director, deputy director, confidential secretary, support staff, and three divisions; certification, ((monitoring)) agency support and business development, and information services.

(3) The office provides the following services: Certification of businesses, monitoring agency/educational institution compliance with chapter 39.19 RCW and this title, publication of a list of certified businesses, identification of barriers to participation by minority ((and)), women, and socially and economically disadvantaged-owned businesses in the contracting and procurement processes of state agencies and educational institutions, and development of a plan which ensures opportunities for qualified minority ((and)), women, and socially and economically disadvantaged-owned businesses to participate.

[Statutory Authority: RCW 39.19.030(7). 92-24-107, 326-07-030, filed 12/2/92, effective 1/2/93.]

OTS-6899.1


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-010   In general.   (1) Any business which meets the definition of a minority business enterprise, a women's business enterprise, a minority woman's business enterprise, or a combination minority and women's business enterprise, or socially and economically disadvantaged business enterprise, or corporate-sponsored dealership as set forth in this title, is eligible to be certified by the state of Washington.

(2) It is not the intent of the program to encourage the participation of businesses owned and controlled by minorities, and/or women, and/or socially and economically disadvantaged individuals, who have not encountered practices which prohibited or limited their access to contract opportunities, markets, financing, and other resources, based on their race, ethnic origin, or sex, or disability.

(3) Notwithstanding the provisions in subsection (1) of this section, to be eligible for certification, any business applying for certification shall have obtained all licenses necessary to lawfully conduct business in the state of Washington.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-010, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 87-18-030 (Order 87-6), 326-20-010, filed 8/27/87. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-010, filed 10/28/83.]


NEW SECTION
WAC 326-20-045   Proof of socially and economically disadvantaged status.   The following guidance is adapted, with minor modifications, from the United States Small Business Administration's regulations concerning social and economic disadvantage determinations (see 13 CFR 124.103(c) and 124.104) and 49 CFR Part 26. Each nonpresumptive socially and economically disadvantaged owner of a business applying for certification shall submit with the application form the statement of personal net worth and social and economic disadvantage forms with documents which show that the owner is a socially and economically disadvantaged individual. The final determination will be in the sole discretion of the office.

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NEW SECTION
WAC 326-20-046   Proof of social disadvantage.   (1) Evidence of individual social disadvantage must include the following elements:

(a) At least one objective distinguishing feature that has contributed to social disadvantage, such as race, ethnic origin, gender, disability, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged;

(b) Personal experiences of substantial and chronic social disadvantage in American society, not in other countries; and

(c) Negative impact on entry into or advancement in the business world because of the disadvantage. The office will consider any relevant evidence in assessing this element. In every case, however, the office will consider education, employment and business history, where applicable, to see if the totality of circumstances shows disadvantage in entering into or advancing in the business world.

(i) Education. The office will consider such factors as denial of equal access to institutions of higher education and vocational training, exclusion from social and professional association with students or teachers, denial of educational honors rightfully earned, and social patterns or pressures which discouraged the individual from pursuing a professional or business education.

(ii) Employment. The office will consider such factors as unequal treatment in hiring, promotions and other aspects of professional advancement, pay and fringe benefits, and other terms and conditions of employment; retaliatory or discriminatory behavior by an employer or labor union; and social patterns or pressures which have channeled the individual into nonprofessional or nonbusiness fields.

(iii) Business history. The office will consider such factors as unequal access to credit or capital, acquisition of credit or capital under commercially unfavorable circumstances, unequal treatment in opportunities for government contracts or other work, unequal treatment by potential customers and business associates, and exclusion from business or professional organizations.

(2) With respect to subsection (1) of this section, the office notes that people with disabilities have disproportionately low incomes and high rates of unemployment. Many physical and attitudinal barriers remain to their full participation in education, employment, and business opportunities available to the general public. The Americans with Disabilities Act (ADA) was passed in recognition of the discrimination faced by people with disabilities. It is plausible that many individuals with disabilities -- especially persons with severe disabilities (e.g., significant mobility, vision, or hearing impairments) -- may be socially and economically disadvantaged.

(3) Under the laws concerning social and economic disadvantage, people with disabilities are not a group presumed to be disadvantaged. Nevertheless, the office shall look carefully at individual showings of disadvantage by individuals with disabilities, making a case-by-case judgment about whether such an individual meets the criteria of this section. Subject to Title II of the ADA, the office must also ensure its SEDBE programs are accessible to individuals with disabilities. For example, physical barriers or the lack of application and information materials in accessible formats cannot be permitted to thwart the access of potential applicants to the certification process or other services made available to SEDBEs and applicants.

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NEW SECTION
WAC 326-20-047   Proof of economic disadvantage.   Evidence of individual social disadvantage must include the following elements:

(1) Submission of narrative and financial information.

(a) Each individual claiming economic disadvantage must describe the conditions, which are the basis for the claim in a narrative statement, and must submit personal financial information.

(b) When married, an individual claiming economic disadvantage also must submit separate financial information for his or her spouse, unless the individual and the spouse are legally separated.

(2) Factors to be considered. In considering diminished capital and credit opportunities, the office will examine factors relating to the personal financial condition of any individual claiming disadvantaged status, including personal income for the past two years (including bonuses and the value of company stock given in lieu of cash), personal net worth, and the fair market value of all assets, whether encumbered or not. The office will also consider the financial condition of the applicant compared to the financial profiles of small businesses in the same primary industry classification, or, if not available, in similar lines of business, which are not owned and controlled by socially and economically disadvantaged individuals in evaluating the individual's access to credit and capital. The financial profiles that the office will compare include total assets, net sales, pretax profit, sales/working capital ratio, and net worth.

(3) Transfers within two years.

(a) Except as set forth in (b) of this subsection, the office will attribute to an individual claiming disadvantaged status any assets which that individual has transferred to an immediate family member, or to a trust, a beneficiary of which is an immediate family member, for less than fair market value, within two years prior to a concern's application for participation in the program, unless the individual claiming disadvantaged status can demonstrate that the transfer is to or on behalf of an immediate family member for that individual's education, medical expenses, or some other form of essential support.

(b) The office will not attribute to an individual claiming disadvantaged status any assets transferred by that individual to an immediate family member that are consistent with the customary recognition of special occasions, such as birthdays, graduations, anniversaries, and retirements.

(c) In determining an individual's access to capital and credit, the office may consider any assets that the individual transferred within such two-year period described by (a) of this subsection that are not considered in evaluating the individual's assets and net worth (e.g., transfers to charities).

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NEW SECTION
WAC 326-20-048   Presumption of disadvantage.   (1) The office presumes that citizens of the United States or lawfully admitted permanent residents who are women, African Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, or other minorities found to be disadvantaged by the program, are socially and economically disadvantaged individuals. Applicants are required to submit a signed, notarized certification that each disadvantaged owner is, in fact, socially and economically disadvantaged.

(2)(a) The office requires each individual nonpresumptive socially and economically disadvantaged owner of a firm applying to participate as a SEDBE whose ownership and control are relied upon for SEDBE certification to submit a signed, notarized statement of personal net worth, with appropriate supporting documentation.

(b) In determining net worth, the office excludes an individual's ownership interest in the applicant firm and the individual's equity in his or her primary residence (except any portion of such equity that is attributable to excessive withdrawals from the applicant firm). A contingent liability does not reduce an individual's net worth.

(i) Rebuttal of disadvantage. If the statement of personal net worth that an individual submits under this section shows that the individual's personal net worth exceeds seven hundred fifty thousand dollars, the individual's economic disadvantage is rebutted. The office is not required to have a proceeding under this section in order to rebut the presumption of economic disadvantage in this case.

(ii) When an individual's social and/or economic disadvantage has been rebutted, his or her ownership and control of the firm in question cannot be used for purposes of SEDBE eligibility under this section unless and until he or she makes an individual showing of social and/or economic disadvantage. If the basis for rebutting a determination that the individual's personal net worth exceeds seven hundred fifty thousand dollars, the individual is no longer eligible for participation in the program and cannot regain eligibility by making an individual showing of disadvantage.

(3) Individual determinations of social and economic disadvantage. Firms owned and controlled by individuals who are not presumed to be socially and economically disadvantaged may apply for SEDBE certification. The office makes a case-by-case determination of whether each individual whose ownership and control are relied upon for SEDBE certification is socially and economically disadvantaged. In such a proceeding, the applicant firm has the burden of demonstrating to the office, by a preponderance of the evidence, that the individuals who own and control it are socially and economically disadvantaged. An individual whose personal net worth exceeds seven hundred fifty thousand dollars shall not be deemed to be economically disadvantaged. In making these determinations, the office uses the guidance found in 49 CFR Part 26, Appendix E. The office requires that applicants provide sufficient information to permit determinations under the guidance of 49 CFR Part 26, Appendix E.

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AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-050   Proof of ownership of business.   (1) All minority ((or)), women, or socially and economically disadvantaged owners shall submit to the office proof of their ownership of the requisite percentage of the business at the time the application is submitted. Such proof shall consist of stock certificates, a notarized affidavit of stock ownership from the corporate treasurer, a partnership agreement, ((cancelled)) canceled check used to purchase ownership, or other recognized proof of ownership. The ownership shall be real, substantial, and continuing, shall go beyond the pro forma ownership of the business reflected in the ownership documents, and shall be based on the owner's capital contribution. The minority, and/or women, and/or socially and economically disadvantaged owner(s) shall enjoy the customary incidents of ownership and shall share in the risks and profits commensurate with their ownership interests, as demonstrated by an examination of the substance and the form of the arrangements.

(2) In cases of sole proprietorships or other cases where documentary proof of ownership is not available, the minority ((or)), women, or socially and economically disadvantaged owners shall so advise the office, which may undertake further investigation. The office may also require documents showing how and when the minority ((or)), women, or socially and economically disadvantaged owners' interest in the business was acquired.

(3) The office may, for any reason, require any minority ((or)), women, or socially and economically disadvantaged owners to provide additional proof of, or information concerning, ownership. The office may request additional information regarding separate ownership of a business including, but not limited to, a separate property agreement.

(4) Ownership of a corporate-sponsored dealership shall be evaluated by using the following standards:

(a) The minority ((or)), women, or socially and economically disadvantaged owner(s) have entered into a written agreement, contract, or arrangement with a national or regional corporation and has been granted a license to offer, sell, or distribute goods or services at wholesale or retail, leasing, or otherwise use the name, service mark, trademark, or related characteristics of the sponsoring corporation.

(b) The capital investment for the dealership or business is jointly contributed by the minority ((or)), women, or socially and economically disadvantaged owner(s) and the sponsoring corporation.

(c) The original investment contributed by the minority ((or)), women, or socially and economically disadvantaged owner(s) may be less than fifty-one percent, but must constitute at least twenty-five percent of the capitalization investment (total required equity capital) in the dealership corporation.

(d) A specified time limit of not more than ten years must be established, binding between the minority ((or)), women, or socially and economically disadvantaged owner(s) and the sponsoring corporation, within which the buy-out of the corporate sponsor's interest shall be complete.

(e) The sponsoring corporation must have specifically developed a national or regional corporate sponsored dealership program which includes such features as capitalization assistance from the sponsoring corporation, on-going business operations training, technical assistance to the dealership owner, and a corporate sponsored minority ((and)), women(('s)), and socially and economically disadvantaged individual's business program.

(f) The minority ((or)), women, or socially and economically disadvantaged owner(s) must demonstrate that the relationship between the corporate sponsor and the minority ((or)), women(('s)), or socially and economically disadvantaged individual's business was not formed for the primary purpose of achieving certification under chapter 39.19 RCW, or any similar provision of any ordinance, regulation, rule, or law.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-050, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 87-18-030 (Order 87-6), 326-20-050, filed 8/27/87; 84-09-002 (Order 84-5), 326-20-050, filed 4/5/84. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-050, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-070   Counting ownership held in trust.   In determining whether the fifty-one percent ownership requirement is met, no stock or ownership held in trust shall be counted, except in the following cases:

(1) Where both the trustee and the beneficiary are minorities, or both are women, or both are socially and economically disadvantaged individuals, and the trustee meets the control requirement; or

(2) Where the stock or ownership is held in an irrevocable trust for the benefit of a minority ((or)), a woman, or a socially and economically disadvantaged individual, and the minority ((or)), woman, or socially and economically disadvantaged beneficiary meets the control requirement.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-070, filed 5/11/92, effective 6/11/92. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-070, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-080   Factors considered in determining control.   (1) The minority ((or)), woman, or socially and economically disadvantaged owner(s) must possess and exercise managerial and operational control over the day-to-day affairs of the business.

(a) Managerial control. The minority ((or)), woman, or socially and economically disadvantaged owner(s) has the demonstrable ability to make independent and unilateral business decisions needed to guide the future and direction of the firm.

(b) Operational control. The minority ((or)), woman, or socially and economically disadvantaged owner(s) has the demonstrable ability to independently make basic decisions pertaining to the daily operations of the business.

(2) Whether a minority ((or)), woman, or socially and economically disadvantaged owner meets the control requirement is determined on an application-by-application basis. Office management, clerical, or other experience unrelated to the firm's field of operations, is insufficient to establish that the business is legitimately owned and controlled.

(3) Factors which may be considered in determining whether the minority ((or)), woman, or socially and economically disadvantaged owner meets the control requirement include, but are not limited to, the following:

(a) Authority and restrictions as indicated in the articles of incorporation, bylaws, partnership agreements and/or other business agreements and documents;

(b) The financial interest and/or participation in any other business by any owner or key personnel;

(c) Past and current employment history of minority and women owners involved in the business;

(d) Members of the board of directors and corporate officers;

(e) Experience, training, and expertise of any owners and key personnel;

(f) Recent changes in ownership and/or control of the business;

(g) Financial obligation to and capital contributions from owners and nonowners of the business; and

(h) Documentation indicating who has ultimate authority to make policy and management decisions and to legally obligate the business.

(4) If persons who are not minorities ((or)), women, or socially and economically disadvantaged are disproportionately responsible for the operation of the business, then the business is not eligible for certification.

(5) The requirements of this section shall not apply, if the business qualifies as a corporate-sponsored dealership under the provisions of WAC 326-20-050(4). Control of a corporate-sponsored dealership will be evaluated using the following standards:

(a) If the sponsoring corporation retains majority voting rights and control of the board of directors, then the minority ((or)), women, or socially and economically disadvantaged owner(s) must annually apply at least fifty percent of the net profit and bonuses toward the buy-out of the corporate sponsors' interest within the buy-out time limit established with the corporation.

(b) The minority ((or)), women, or socially and economically disadvantaged owner(s) must show active participation in the decision-making process on the board of directors of the dealership.

(c) The minority ((or)), women, or socially and economically disadvantaged owner(s) must have and exercise managerial and operational control over the day-to-day management of the dealership, with responsibility for sales, service volume, and profits.

(d) The minority ((or)), women, or socially and economically disadvantaged owner(s) must have prior business or management experience relating to the business being entered into as an owner.

(e) The minority ((or)), women, or socially and economically disadvantaged owner(s) must be president of any corporation formed by the business.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-080, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-12-060 (Order 88-5), 326-20-080, filed 5/31/88; 87-18-030 (Order 87-6), 326-20-080, filed 8/27/87. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-080, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-110   Application process.   (1) The office will develop and make available an application form for certification under chapter 39.19 RCW, and WAC 326-20-010. The application form may be modified at any time. The form will solicit enough information to determine whether the applicant is eligible for certification for state-funded projects and may include supplemental questions necessary to determine whether the applicant is eligible for certification for a specific federally-funded project. As part of its investigation, the office may require minority ((and)), women, and socially and economically disadvantaged owners to provide information in addition to that requested on the application forms.

(2) Where additional information is required from the applicant business to complete the investigation, the office may request the information in writing and may impose a time limit of not more than twenty days in which the applicant must respond. The letter shall include notice to the applicant that, if the applicant fails to provide the information within the time requested, the file will be closed administratively. If all the requested information is not received by the office within the twenty days, the office may administratively close the file. The applicant will be notified in writing that the file has been administratively closed.

(3) Upon timely receipt of a written request for extension of the time to respond to the request for additional information, an extension of time to respond may be granted by the director. A showing of extenuating circumstances may be required, and granting of such request for extension is in the sole discretion of the director.

(4) Administrative closure means that the file is placed in inactive status, and further processing of the application is suspended. An applicant may petition the office for reopening or reactivation of the application file, by written request to the director. Requests to reopen will be granted in the sole discretion of the director. The applicant will be notified in writing of the director's decision to grant or deny the request to reactivate the file. If the request is denied, the applicant may submit a new application: Provided, That an applicant may not file more than one additional application within a year from the date of the closure. If the file is administratively reopened and processing resumed, the application will be processed as if it had been received on the date the request to reopen the file is granted by the director.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-110, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 86-17-018 (Order 86-2), 326-20-110, filed 8/11/86. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-110, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 94-11-114, filed 5/18/94, effective 6/18/94)

WAC 326-20-120   Submittal of forms.   Application forms may be submitted by mail to the office at the following address:


STATE OF WASHINGTON

OFFICE OF MINORITY AND WOMEN'S BUSINESS ENTERPRISES

PO BOX 41160

OLYMPIA, WA 98504-1160


Forms may also be delivered to the office at its location, 406 South Water Street, Olympia, Washington.


The minority ((or)), woman, or socially and economically disadvantaged owner shall be responsible for ensuring that the form is complete and accurate and is properly delivered to the office. The applicant should keep a copy of the completed form and all documents submitted with the form for its own reference.

[Statutory Authority: RCW 39.19.030. 94-11-114, 326-20-120, filed 5/18/94, effective 6/18/94. Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-120, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 85-14-101 (Order 85-6), 326-20-120, filed 7/2/85. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-120, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-160   Burden of proof.   The applicant shall have the burden of proving to the satisfaction of the office that it is eligible for certification or recertification.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-160, filed 5/11/92, effective 6/11/92. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-160, filed 10/28/83.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-173   Expiration of certification upon death or disability of owner of certified business.   (1) Upon death or commencement of long-term disability of the minority ((or)), woman, or socially and economically disadvantaged owner of a certified business, the guardian of the disabled owner, the executor of the owner's estate, or other person shall notify the office in writing within thirty days of the death or documented disability. All notifications of long-term disability shall be documented by a statement from a qualified physician.

(2) "Long-term disability," for purposes of this section, shall mean the permanent inability to work, or inability to control the day-to-day operations of the business for a period of three consecutive months (ninety days or more), including both mental or physical incompetence.

(3) The certification of a business shall expire thirty days after receipt by the office of a notice of a death or documented disability of the owner of the business. Upon expiration of certification, the office shall notify the firm, in writing, that it has been decertified. The decertification decision will be considered final for purposes of WAC 326-08-015.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-173, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-22-017 (Order 88-9), 326-20-173, filed 10/24/88.]


AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-180   Effect of certification.   Certification ((as a MWBE)) by OMWBE under the state program shall have the following effects:

(1) Certification shall entitle state agencies, educational institutions, and local government jurisdictions to count the business toward meeting their goals under this chapter, local legislation, and that require the participation of disadvantaged business enterprises. Certification shall be effective as of the date the decision is made in writing and will remain in effect for three years; except that the certification of DBEs shall be ((renewed)) updated annually.

(2) Certification does not constitute compliance with any other laws or regulations, including contractor registration or prequalification, and does not relieve any business of its obligations under other laws or regulations. Certification does not constitute any determination by the office that the firm is responsible or capable of performing any work.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, 326-20-180, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), 326-20-180, filed 4/18/88; 84-09-002 (Order 84-5), 326-20-180, filed 4/5/84. Statutory Authority: 1983 c 120 3(7). 83-22-045 (Order 83-3), 326-20-180, filed 10/28/83.]

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