TITLE 34. PUBLIC FINANCE

DIVISION 1. HISTORICALLY UNDERUTILIZED BUSINESSES

34 TAC §§20.281, 20.282, 20.284, 20.285, 20.288, 20.294 - 20.296, 20.298

The Comptroller of Public Accounts proposes amendments to §20.281, concerning policy and purpose; §20.282, concerning definitions; §20.284, concerning statewide annual HUB utilization goals; §20.285, concerning subcontracts; §20.288, concerning certification process; §20.294, concerning graduation procedures; §20.295, concerning program review; §20.296, concerning HUB coordinator responsibilities; and §20.298, concerning mentor-protégé program.

No legislation enacted within the last four years provides the statutory authority for these amendments.

INTRODUCTION

On December 2, 2025, the comptroller adopted emergency rules to avoid unconstitutional application of the Texas historically underutilized business (HUB) program. Under those rules, the comptroller rebranded the HUB program as Veteran Heroes United in Business, or VetHUB, and revised the eligibility criteria so that only businesses owned by veterans with disabilities connected to their military service are eligible. The comptroller proposes to amend its rules to match the emergency rules. In addition, the comptroller proposes amendments to streamline the HUB program's subcontracting provisions.

CONSTITUTIONAL ANALYSIS

Recent court decisions have changed the legal landscape around race- and sex-based discrimination. In Students for Fair Admission, Inc. v. Harvard, 600 U.S. 181 (2023), the Supreme Court prohibited race-based preferences in government benefits. In United States v. Skrmetti, 145 S. Ct. 1816 (2025), the Supreme Court reiterated that it is unlawful to treat a member of one sex less favorably than the other, absent some pertinent difference. And in Ames v. Ohio Department of Youth Services, 605 U.S. 303 (2025), the Supreme Court held that discrimination against members of "majority groups" can still be unlawful discrimination. These precedents apply to the State and are also instructive for construing the Texas Constitution's overlapping protections. See U.S. CONST. amend. XIV; TEX. CONST. art. I, §3a; see, e.g., Bell v. Low Income Women of Tex., 95 S.W.3d 253, 266 (Tex. 2002). Citing the Texas and U.S. Constitutions and the U.S. Supreme Court, Governor Abbott issued an executive order stating that agencies must "treat people equally regardless of membership in any racial group" and adhere to "the color-blind guarantee of our state and federal Constitutions by prohibiting all forms of government race discrimination." Executive Order GA-55, 50 Tex. Reg. 810-11.

In Nuziard v. Minority Business Development Agency, plaintiffs sued a federal agency that provided benefits to minority-owned businesses. 721 F.Supp. 3d 431 (N.D. Tex, 2024), appeal dismissed, No. 24 10603, 2024 WL 5279784, at *1 (5th Cir. July 22, 2024). The plaintiffs were small business owners who were denied assistance because their race was not among the "codified list of preferred races/ethnicities" in the statute and rules used to determine eligibility. Id. at 448. The agency relied on a presumption that "anyone from the listed groups is 'socially or economically disadvantaged' and thus entitled to services." Id. The statute defined an "economically disadvantaged individual" as one "who has been subjected to racial or ethnic prejudice or cultural bias . . . because of the identity of the individual as a member of a group, without regard to any individual quality of the individual that is unrelated to that identity." 15 U.S.C. §9501; Nuziard, 721 F. Supp. 3d at 452. The statute listed groups that it deemed economically disadvantaged, including "Black or African American" and "Hispanic or Latino." Id. Because of the explicit references to race and ethnicity, the court applied strict scrutiny. Id. at 478. It held that the agency had a compelling interest in remedying discrimination in government contracting, shown through "significant disparity ratios for {minority-owned businesses} in prime contracting." Id. at 488. In spite of that compelling interest, the statute was unconstitutional, because it was not narrowly tailored to address that interest. Id. at 493. The exclusion of many minority business owners from the presumption of disadvantage, including those from the Middle East and North Asia, was arbitrary. Id. at 490. Furthermore, presuming that all members of a group are equally disadvantaged was an "illogical stereotype." Id. at 492-493. Finally, there was no "logical endpoint" where the program could be retired because the discrimination had been remedied. Id. at 493-494. Due to the lack of narrow tailoring, the court struck down the racial and ethnic presumptions as unconstitutional under the Fourteenth Amendment. Id. at 498.

Like the federal statute at issue in Nuziard, Government Code, Chapter 2161 as implemented in §20.282 of this title presumes that certain demographic groups are disadvantaged. The definition of "economically disadvantaged person" in Government Code, §2161.002(3) and the definition of "qualified owner" in §20.282 of this title both explicitly incorporate race, ethnicity, and sex. Like that federal statute, Government Code, Chapter 2161 was adopted with a purpose to address disparities in contracting, established through a study. Like that federal statute, the HUB program's definitions exclude business owners from the Middle East and North Asia. Like that federal statute, the HUB program relies on a stereotype that presumes all members of a demographic group are equally disadvantaged. Like that federal statute, the HUB program has no logical end point. It is clear from Nuziard that the HUB program is not narrowly tailored to meet the strict scrutiny required for racial and ethnic classifications nor the intermediate scrutiny required for sex-based classifications under the state and federal constitutions. Therefore, the highest state and federal law requires the comptroller to remove such classifications from the HUB program.

Unlike race, ethnic, and sex-based classifications, veteran status and disability status are subject only to rational basis scrutiny. Personnel Administrator of Mass. v. Feeney, 442 U.S. 256 (1979) (state statute preferencing veterans over non-veterans was subject only to rational basis review and approved as constitutional). There are no judicial decisions suggesting that a program to assist disabled veterans only is unconstitutional.

To ensure that the comptroller does not implement the HUB program in an unconstitutional way, these rules eliminate each classification that could be applied in an unconstitutional manner. Without those classifications, the program will serve small businesses owned by service-disabled veterans, regardless of their race, sex, or ethnicity.

ADDRESSING UNCONSTITUTIONAL CLASSIFICATIONS

The term "sex" replaces "gender" throughout the amended rules. This aligns the terminology of the rules with court decisions that have interpreted the Texas and United States Constitutions.

Amended §20.281 restates the purpose of the comptroller's HUB program, which is to promote full and equal opportunities for all businesses in accordance with the equal protection provisions of the Texas and United States Constitutions. Language that referred to remediation of disparities is removed.

Amended §20.282 removes the definition of "disparity study." That term is not used in the amended rules.

Amended §20.282 clarifies that the definition of "economically disadvantaged person" in Government Code, Chapter 2161 must be interpreted in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

Amended §20.282 clarifies the definition of "historically underutilized business" so that the term no longer appears within its own definition.

Amended §20.282 revises the definition of "qualifying owner" to eliminate classifications based on race, ethnicity, and gender. Although those classifications appear in Government Code, Chapter 2161, courts have found their use in equivalent contexts to be unconstitutional. See the foregoing "Constitutional Analysis" section of this proposal; see also Texas Attorney General Op. KP-0505 (2026), pp. 26-35 ("Texas's HUB framework erects a pervasive, discriminatory regime that violates the U.S. Constitution's Equal Protection Clause as well as the Texas Constitution's Equal Rights Amendment through indefensible fixation on sex and race.").

Amended §20.284 eliminates statewide quantitative HUB utilization goals. These goals were based on a disparity study that focused on race, ethnicity, and sex-based analysis. Under the revised eligibility criteria, those goals are neither well-supported nor viable. In place of the percentage utilization goals, the amended rule sets a goal of increasing participation, which accords with Government Code, §2161.181. Agencies shall set their own goals for increasing the utilization of HUB businesses based on relevant factors. However, instructions for state agencies to consider the disparity study are removed, in order to avoid the constitutional issues inherent in race, ethnicity, and sex-based classifications. Agencies are instructed to consider businesses that are owned by "qualified owners," because the definition of "qualified owners" in §20.282 no longer includes classifications based on race, ethnicity, and sex.

Amended §20.288 eliminates references to minority business enterprises and women's business enterprises, which are classifications outside the scope of the amended rules. It specifies that the definition of "historically underutilized business" in Government Code, Chapter 2161 must be interpreted in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

Amended §20.294 removes a reference to overcoming the effects of discrimination. This reference was unnecessary, and its removal will not affect program implementation. The comptroller will continue to enforce the same size standards in determining eligibility for certification.

Amended §20.295 removes references to the disparity study. It states that the comptroller may determine the need to reassess the HUB rules.

Amended §20.296 specifies that an agency HUB coordinator shall carry out their duties on a race-neutral, ethnicity-neutral, and sex-neutral basis, mindful that the Texas and U.S. Constitutions prohibit discrimination and require equal protection under the law. Because the state and federal constitutions have always applied to state agency employees including HUB coordinators, the added language is merely a reminder.

Amended §20.298 eliminates a reference to the disparity study. Agencies shall implement the Mentor-Protégé program without reference to the disparity study.

STREAMLINING SUBCONTRACTING PLANS

The comptroller revises the term "HUB subcontracting plan" to "subcontracting plan" throughout these amended rules. The definition of "subcontracting plan" is relocated within §20.282 to maintain alphabetical order, and the numbering is adjusted accordingly. "Subcontracting plan" is more appropriate, because there is not a requirement for a vendor to subcontract to a HUB to complete the plan. Vendors are permitted to use any subcontractor, regardless of HUB status, provided that the selection was made in demonstrated good faith in accordance with the rules.

Amended §20.285(b)(1) reiterates that an agency shall require subcontracting plans as part of a solicitation response whenever subcontracting opportunities with HUBs are probable. The HUB rules require agencies to check the comptroller's HUB directory as part of the process of determining whether subcontracting is probable. See §20.285(a). In the HUB directory, HUBs indicate which types of work they perform and which parts of the state they serve. If the directory shows that no HUBs are available for contemplated subcontracts, there is not a probable HUB subcontracting opportunity. The intent of §20.285(b) is for agencies to check that HUBs are available before determining that subcontracting opportunities are probable. The added language provides additional clarity.

Amended §20.285(b)(1) also removes the requirement to include a historically underutilized business utilization goal in a solicitation which requires the respondent to submit a subcontracting plan. The utilization goal was used by respondents to complete the "meeting-or-exceeding-HUB-goal method," which is deleted from the amended rule. Because the percentage utilization goal is no longer useful in completing the subcontracting plan, and because including the goal may mislead a vendor to believe that a minimum amount of subcontracting is required, the amended rule allows an agency to omit such a goal from the solicitation.

Amended §20.285(b)(3) aligns the language of the rule with Government Code, §2161.252(b). Both the amended section and the statute now state that when a state agency requires a subcontracting plan, a bid, proposal, offer, or other applicable expression of interest for the contract must contain a plan to be considered responsive.

Amended §20.285(b)(4) leaves untouched the ability of a state agency to allow respondents to cure minor deficiencies in subcontracting plans. Also untouched is the principal that a state agency may not allow a respondent to cure material deficiencies. However, the amendments revise the description of material deficiencies because respondents are no longer required to contact minority trade organizations, or to provide a statement of how it will self-perform work in the subcontracting plan. That is consistent with other changes in §20.285.

Amended §20.285(d) addresses demonstration of good faith in the development of a subcontracting plan. The amended rule provides that for each part of work that the solicitation identified as a probable subcontracting opportunity and each part of the work that the respondent actually intends to subcontract, the respondent must demonstrate its good faith development of a subcontracting plan by either inviting small business to bid for subcontracts (the "solicitation method") or stating that it does not intend to subcontract (the "self-performing method"). The amended rule simplifies the preparation of a subcontracting plan, making it easier for respondents to comply, and reducing the number of bids or proposals that are nonresponsive under Government Code, §2161.252(b). The amended subsection (d) eliminates two of the four previous methods for completing a good faith effort: the "all-HUB-subcontractors method" in former paragraph (2), and the "meeting-or-exceeding-HUB-goal method" in former paragraph (3). These methods incentivized respondents to select historically underutilized businesses as subcontractors by allowing them to skip the notification steps in the solicitation method. Under the amended rule, there are no such shortcuts. Respondents that intend to subcontract must perform the same steps, regardless of which subcontractors they select. Eliminating the least-used compliance methods will also simplify the subcontracting form, reducing confusion that may result in noncompliance. The remaining paragraphs are renumbered.

Amended paragraph (1) ensures that the requirement to perform outreach to potential subcontractors under the solicitation method is race, ethnic, and sex-neutral. Additionally, outreach to trade organizations or development centers under former subparagraph (B) is no longer required. The Government Code does not require outreach to such organizations, and the comptroller has determined that the costs of such outreach outweigh the benefits. Finally, the minimum number of HUBs to be solicited is reduced from three to two. Because the eligibility requirements for HUB certification are more stringent, the comptroller anticipates that the number of HUBs available to subcontract will substantially decrease. It is more reasonable to ask vendors to solicit two qualified HUBs than three.

Amended subparagraph (G) allows a respondent to submit its subcontractor selection justification upon request, rather than requiring it with the response. Under this amended rule, the agency may collect any information it needs to evaluate good faith. However, the amendment eliminates a common way subcontracting plans may be noncompliant. This amended subparagraph also makes explicit that a respondent is not required to select a small business if it determines in good faith that another subcontractor is more suitable.

The self-performing method in renumbered paragraph (2) provides expressly that a respondent is not required to subcontract any portion of any contract. While the rules have never required subcontracting, the comptroller now makes that clear. The amended rule provides that a respondent may use the self-performing method to demonstrate a good faith effort for any subcontracting opportunity by indicating that it intends to fulfill the entire contract, including each subcontracting opportunity, with its own equipment, supplies, materials, and employees. The amended rule allows a respondent to submit its self-performing justification upon request, rather than requiring it with the response. This eliminates another common way subcontracting plans may be noncompliant, while maintaining agencies' ability to assess compliance.

Renumbered paragraph (4) is amended to clarify that a business listed in the HUB directory at the time of the good faith effort is considered a HUB for purposes of evaluating a subcontracting plan, even if the business later graduates or has its HUB status revoked or expired. This is not a change in policy, but the clarification may help with interpretation.

Amended subsection (e) states that a state agency may reject a HUB subcontracting plan that was not developed in good faith or was not completed. This is consistent with Government Code, §2161.282(b), which states that a response that does not include a subcontracting plan is nonresponsive. To address the situation where a subcontracting plan identifies businesses that are no longer HUBs, the amended subsection allows the agency to request a revised subcontracting plan. While agencies have always had discretion to work with contractors to amend subcontracting plans after award (see §20.285(i)), this revision makes it clear that agencies have the same discretion to work with respondents before award.

FISCAL NOTE

Brad Reynolds, Chief Revenue Estimator, has determined that during the first five years that the proposed amendments are in effect, the amended rules: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will decrease the number of individuals subject to the rules' applicability; and will not positively or adversely affect this state's economy. This proposal amends existing rules.

Mr. Reynolds also has determined that the proposed amended rules would have no fiscal impact on the state government, units of local government, or individuals. The proposed amendments would align the rules' language with court decisions that have interpreted the Texas and United States Constitutions by eliminating race, ethnic, and sex-based classifications from the rules. Thus, the proposed amendments would benefit the public by ensuring that the Veteran Heroes United in Business program (formerly the HUB program) is applied in a manner consistent with recent court decisions regarding constitutionality of race-, ethnic-, or sex-based classifications. Furthermore, the proposed amendments would benefit the public by streamlining the program's subcontracting provisions, thereby, increasing compliance. There would be no anticipated significant economic cost to the public. The proposed amendments would have no significant fiscal impact on rural communities. The pool of businesses eligible to participate in the program will decline significantly. Costs to small businesses formerly certified as HUBs for monitoring state contracting opportunities could increase as notices and invitations to bid delivered to small businesses are reduced, and the share of state contracts won by those businesses could decrease, to an unknown extent; the fiscal implications for small businesses cannot be determined.

COMMENTS AND HEARING

You may submit comments on the proposal or information related to the cost, benefit, or effect of the proposal, including any applicable data, research or analysis, to Gerard MacCrossan P.O. Box 13528 Austin, Texas 78711 or to the email address: Gerard.MacCrossan@cpa.texas.gov. The comptroller must receive your comments or other information no later than 30 days from the date of publication of the proposal in the Texas Register.

A public hearing will be held to receive comments on the proposed amendments. There is no physical location for this meeting. The meeting will be held at 7:00 a.m., Central Time, on April 7, 2026. To access the online public meeting by web browser, please enter the following URL into your browser: https://txcpa.webex.com/txcpa/j.php?MTID=mac3fedd0742ad312afab6a350ab5e570. To join the meeting by computer or cell phone using the Webex app, use the access code 2481 363 9967 and password SPDRULES. Persons interested in providing comments at the public hearing may contact Mr. Gerard MacCrossan, Comptroller of Public Accounts, at Gerard.MacCrossan@cpa.texas.gov or by calling (512) 463-4468 by April 6, 2026.

AUTHORITY

These amendments are proposed under Government Code, §2161.0012, which authorizes the comptroller to adopt rules to efficiently and effectively administer Chapter 2161, and Government Code, §2161.002, which authorizes the comptroller to adopt rules to administer Subchapters B and C of Chapter 2161. These amendments implement Government Code, Chapter 2161, in light of the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

These amendments implement Government Code, Chapter 2161.

§20.281. Policy and Purpose.

It is the policy of the comptroller to encourage the use of historically underutilized businesses (HUBs) by state agencies and to assist agencies in the implementation of this policy through race, ethnic, and sex-neutral [gender-neutral] means. The purpose of the HUB program is to promote full and equal business opportunities for all businesses [in an effort to remedy disparity in state procurement and contracting in accordance with the HUB utilization goals specified in the State of Texas Disparity Study]. All rules, guidance, and statutes related to the HUB program must be interpreted, applied, and implemented in accordance with the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

§20.282. Definitions.

The following words and terms, when used in this division, shall have the following meanings, unless the context clearly indicates otherwise. Additional applicable definitions are located in §20.25 of this title.

(1) Applicant--A corporation, sole proprietorship, partnership, joint venture, limited liability company, or other business organization that applies to the comptroller for certification as a historically underutilized business.

(2) Application--The information, documents, and representations submitted by an applicant that constitute its request for certification as a historically underutilized business.

(3) Commodities--Any tangible goods.

[(4) Disparity study--The State of Texas Disparity Study - 2009, conducted by MGT of America, Inc., dated March 30, 2010, or any updates of the study that are prepared on behalf of the state as provided by Government Code, §2161.002(c).]

(4) [(5)] Economically disadvantaged person--Has the meaning assigned by Government Code, §2161.001(3), subject to the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV.

(5) [(6)] Graduation--When a certified HUB exceeds the size standards and becomes ineligible for continued certification as a result.

(6) [(7)] Historically underutilized business (HUB)--A business organization described in subparagraphs (A) - (F) of this paragraph that is certified by the comptroller because it has not exceeded the size standards established by §20.294 of this title, maintains its principal place of business in Texas, and is:

(A) a corporation formed for the purpose of making a profit in which at least 51% of all classes of the shares of stock or other equitable securities are owned by one or more qualifying owners;

(B) a sole proprietorship created for the purpose of making a profit that is 100% owned, operated, and controlled by a qualifying owner;

(C) a partnership formed for the purpose of making a profit in which 51% of the assets and interest in the partnership is owned by one or more qualifying owners;

(D) a joint venture in which each entity is described by subparagraphs (A), (B), (C), or (E) of this paragraph [a HUB];

(E) a supplier contract between an entity described by subparagraphs (A), (B), (C), or (D) of this paragraph [a HUB] and a prime contractor under which the HUB is directly involved in the manufacture or distribution of the supplies or materials or otherwise warehouses and ships the supplies; or

(F) a business other than described in subparagraphs (B), (C), (D), and (E) of this paragraph, which is formed for the purpose of making a profit and is otherwise a legally recognized business organization under the laws of the State of Texas, provided that at least 51% of the assets and 51% of any classes of stock and equitable securities are owned by one or more qualifying owners.

(7) [(8)] Historically underutilized business (HUB) coordinator--The staff member designated by a state agency to be primarily responsible for overseeing the implementation of HUB laws and monitoring attainment of HUB utilization goals.

(8) [(9)] HUB directory--The Historically Underutilized Business Directory published on the comptroller's website.

[(10) HUB subcontracting plan--Written plan identifying whether a contract will be self-performed or include the use of subcontractors, which subcontractors will be used, how much of the contract each subcontractor will receive, and how subcontractors were selected.]

(9) [(11)] Mentor-Protégé Program--A program designed by the comptroller to encourage agencies to work with prime contractors and HUBs to foster long-term relationships.

(10) [(12)] Non-treasury funds--Funds that are not state funds subject to the custody and control of the comptroller and available for appropriation by the legislature.

(11) [(13)] Other services--All services other than construction and professional services, including consulting services subject to Government Code, Chapter 2254, Subchapter B.

(12) [(14)] Person--A human being.

(13) [(15)] Principal place of business--The location where the qualifying owner or owners of the business direct, control, and coordinate the business's daily operations and activities.

(14) [(16)] Professional services--Services of certain licensed or registered professions that must be purchased by state agencies under Government Code, Chapter 2254, Subchapter A.

(15) [(17)] Qualifying owner--A person who:

(A) is a resident of the State of Texas;

(B) has a proportionate interest and demonstrates active participation in the control, operation, and management of an applicant;

(C) is a service-disabled veteran, [member of one of the following groups:]

[(i) Black Americans, which includes persons having origins in any of the Black racial groups of Africa;]

[(ii) Hispanic Americans, which includes persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race;]

[(iii) American Women, which includes all women of any ethnicity except those specified in clauses (i), (ii), (iv), and (v) of this subparagraph;]

[(iv) Asian Pacific Americans, which includes persons whose origins are from Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Samoa, Guam, the U.S. Trust Territories of the Pacific, the Northern Marianas, and Subcontinent Asian Americans which includes persons whose origins are from India, Pakistan, Bangladesh, Sri Lanka, Bhutan or Nepal;]

[(v) Native Americans, which includes persons who are American Indians, Eskimos, Aleuts, or Native Hawaiians; and]

[(vi)] [Service-disabled Veterans,] which includes veterans as defined by 38 U.S.C. §101(2) who have suffered at least a 20% service-connected disability as defined by 38 U.S.C. §101(16). [who are not Black Americans, Hispanic Americans, American Women, Asian Pacific Americans, or Native Americans; and]

[(D) is a U.S. citizen, born or naturalized, or a service-disabled veteran as defined by 38 U.S.C., §101(2) who has suffered at least a 20% service-connected disability as defined by 38 U.S.C., §101(16).]

(16) [(18)] Resident of the State of Texas--An individual who:

(A) physically resides in the state for a period of not less than six consecutive months prior to submitting an application for HUB certification, and lists Texas as their residency in their most recent tax return submitted to the U.S. Internal Revenue Service, or;

(B) has established, to the satisfaction of the comptroller, a Texas domicile for a period of time sufficient to demonstrate their intention to permanently reside in the state consistently over a substantial period of time.

(17) [(19)] Response--A submission made in answer to an invitation for bid, request for proposal, or other purchase solicitation document, which may take the form of a bid, proposal, offer, or other applicable expression of interest.

(18) [(20)] Subcontractor--An entity that contracts with a prime contractor to work or contribute toward completing work under a purchase order or other contract. The term does not include employees of the contractor but includes contracted workers who will work on the contract.

(19) [(21)] Size standards--Graduation and eligibility thresholds established by the comptroller under §20.294 (relating to Graduation Procedures).

(20) Subcontracting plan--Written plan identifying whether a contract will be self-performed or include the use of subcontractors, which subcontractors will be used, how much of the contract each subcontractor will receive, and how subcontractors were selected.

(21) [(22)] Term contract--A statewide contract established by the comptroller as a supply source for user entities for specific commodities or services.

(22) [(23)] Vendor Identification Number (VID)--A 13-digit identification number used in state government to identify the bidder or business for payment or award of contracts, certification as a HUB, and on the bidders list.

(23) [(24)] Work--Providing goods or performing services pursuant to a contract.

(24) [(25)] Working day--Normal business day of a state agency, not including weekends, federal or state holidays.

§20.284. Statewide Annual HUB Utilization Goals.

(a) In accordance with §20.281 of this title (relating to Policy and Purpose) and Government Code, §2161.181 and §2161.182, each state agency shall make a good faith effort to utilize HUBs in contracts for construction, services (including professional and consulting services) and commodities purchases. Each state agency may achieve the statewide and the annual HUB utilization goals specified in the state agency's Legislative Appropriations Request by contracting directly with HUBs or indirectly through subcontracting opportunities.

(b) The statewide HUB utilization goals are qualitative, with the goal of increasing participation of service-disabled veteran in state purchasing and contracts. [:]

[(1) 11.2% for heavy construction other than building contracts;]

[(2) 21.1% for all building construction, including general contractors and operative builders contracts;]

[(3) 32.9% for all special trade construction contracts;]

[(4) 23.7% for professional services contracts;]

[(5) 26.0% for all other services contracts; and]

[(6) 21.1% for commodities contracts.]

(c) [State agencies shall establish HUB utilization goals for each procurement category identified in subsection (b) of this section. Agencies may set their HUB utilization goals higher or lower than the statewide utilization goals. However, the statewide HUB utilization goals shall be the starting point for establishing state agency-specific goals.] State agency-specific HUB utilization goals shall be based on:

(1) a state agency's fiscal year expenditures and total contract expenditures;

(2) the availability to a state agency of HUBs [in each procurement category];

(3) the state agency's historic utilization of HUBs; and

(4) other relevant factors.

(d) Each state agency shall make a good faith effort to assist HUBs in receiving a portion of the total value of all contracts that the state agency expects to award in a fiscal year. Factors in determining a state agency's good faith shall include:

(1) the state agency's performance in meeting or exceeding their HUB utilization goals or the statewide HUB utilization goals as they included as part of their legislative appropriations request in accordance with Government Code, §2161.127; and

(2) the state agency's adoption and implementation of the following procedures:

(A) prepare and distribute information on procurement procedures in a manner that encourages participation in state contracts by all businesses;

(B) divide proposed requisitions into reasonable lots in keeping with industry standards and competitive bid requirements;

(C) where feasible, assess bond and insurance requirements and design requirements that reasonably permit more than one business to perform the work;

(D) specify reasonable, realistic delivery schedules consistent with a state agency's actual requirements;

(E) ensure that specifications, terms, and conditions reflect a state agency's actual requirements, are clearly stated, and do not impose unreasonable or unnecessary contract requirements;

(F) provide potential bidders with referenced list of certified HUBs for subcontracting;

[(G) develop and apply a written methodology to determine whether their HUB utilization goals are appropriate under the Disparity Study, or whether the statewide HUB utilization goals from the Disparity Study are appropriate for the state agency, and taking into account the provisions of Government Code, §2161.002(d);]

(G) [(H)] identify potential subcontracting opportunities in all contracts and require a [HUB] subcontracting plan for contracts of $100,000 or more over the life of the contract (including any renewals), where such opportunities exist, in accordance with Government Code, §2161.251;

(H) [(I)] seek HUB subcontracting in contracts that are less than $100,000 whenever possible;

(I) [(J)] provide, at a state agency's option, courtesy reviews of respondents' [HUB] subcontracting plans required to be submitted with responses pursuant to Government Code, §2161.252; and

(J) [(K)] provide, at a state agency's option, subcontracting-plan-compliance [HUB-subcontracting-plan-compliance] training to potential respondents during pre-bid, pre-offer, and pre-proposal conferences, or at agency HUB forums.

(e) A state agency may also demonstrate good faith under this section by submitting a supplemental letter with documentation to the comptroller with their HUB report or legislative appropriations request including other relevant information, such as:

(1) identifying the percentage of contracts (prime and subcontracts) awarded to businesses that are not HUBs, but that are owned by economically disadvantaged persons as defined in Government Code, §2161.001;

(2) demonstrating that a different goal from that identified in subsection (b) of this section was appropriate given the state agency's types of purchases;

(3) demonstrating that a different goal was appropriate given the particular qualifications required by a state agency for its contracts;

(4) demonstrating that a different goal was appropriate given that graduated HUBs cannot be counted toward the goal; or

(5) demonstrating assistance to business entities in obtaining HUB certification.

§20.285. Subcontracts.

(a) Analyzing potential contracts of $100,000 or more. In accordance with Government Code, Chapter 2161, Subchapter F, each state agency that considers entering into a contract with an expected value of $100,000 or more shall, before it solicits responses, determine whether subcontracting opportunities are probable under the contract.

(1) State agencies shall use the following steps to determine if subcontracting opportunities are probable under the contract:

(A) examine the scope of work to be performed under the proposed contract and determine if it is likely that some of the work may be performed by a subcontractor;

(B) check the HUB directory for HUBs that may be available to perform the contract work; and

(C) consider whether subcontracting is probable for only a subset of the work expected to be performed or the funds to be expended under the contract.

(2) State agencies may consider additional sources of information regarding the probability of subcontracting, including:

(A) information from other state agencies and local governments; and

(B) information about past state contracts with similar scopes of work.

(b) Requiring [HUB] subcontracting plans.

(1) If a state agency determines that subcontracting opportunities with HUBs are probable, the solicitation shall state that probability and explicitly require that any response include a completed [HUB] subcontracting plan to be considered responsive. The solicitation shall [state the applicable HUB utilization goal, and] provide information on where to find and how to complete the comptroller's [HUB] subcontracting plan form.

(2) A state agency shall require [HUB] subcontracting plans to be submitted with each response. If a state agency permits responses to be submitted in parts, with deadlines for each part, the solicitation shall specify which deadline applies to the [HUB] subcontracting plan and shall not open responses until after the [HUB] subcontracting plan is due.

(3) When a state agency requires a subcontracting plan, a bid, proposal, offer, or other applicable expression of interest for the contract must contain a plan to be considered responsive. [A state agency shall reject any response that does not include a completed and timely HUB subcontracting plan due to material failure to comply with Government Code, §2161.252(b).]

(4) If a properly submitted [HUB] subcontracting plan contains minor deficiencies, such as failure to sign or date the plan or failure to submit already-existing evidence that a good faith effort was completed, the state agency may allow the respondent to cure the minor deficiency. A state agency may not allow a respondent to cure material deficiencies, including completion of a good faith effort after the response deadline, [(]such as contacting potential subcontractors [minority trade organizations] or producing the statement that [of how] the respondent intends to self-perform the work, if [that is] required [by subsection (d)(4) of this section)].

(c) Completing a [HUB] subcontracting plan. The [HUB] subcontracting plan shall consist of a completed form prescribed by the comptroller, with attachments as appropriate.

(d) Demonstrating good faith in the development of a [HUB] subcontracting plan. The [HUB] subcontracting plan must demonstrate that the respondent developed it in good faith. For each part of the work that the solicitation identified as a probable subcontracting opportunity and each part of the work that the respondent actually intends to subcontract, the respondent must demonstrate its good faith development of a [HUB] subcontracting plan by either inviting small businesses to bid for subcontracts (the solicitation method) or stating that it does not intend to subcontract (the self-performing method) [a method described in paragraphs (1)-(4) of this subsection].

(1) Solicitation Method. To complete the solicitation method, the respondent shall comply with all requirements of this clause.

(A) The respondent shall divide the work into reasonable lots or portions consistent with prudent industry practices.

(B) Reserved. [The respondent shall notify, in writing, at least two trade organizations or development centers that serve economically disadvantaged persons, of the subcontracting opportunities that the respondent intends to subcontract.]

(C) The respondent shall notify, in writing, at least two [three] HUBs of the subcontracting opportunities that the respondent intends to subcontract. The respondent shall provide the notice described in this subclause to two [three] or more HUBs per subcontracting opportunity that provide the type of work required.

(D) The notices required by subparagraphs (B) and (C) of this paragraph shall include the scope of work, information regarding location to review plans and specifications, information about bonding and insurance requirements, required qualifications, and other contract requirements and identify a contact person.

(E) The respondent shall provide the notices required by subparagraphs (B) and (C) of this paragraph at least seven working days prior to submission of the response. Neither the day on which the notice is sent nor the day on which the respondent submits its response count as one of the required seven working days. A state agency may determine that circumstances require a different time period than seven working days but must notify potential vendors of the requirement and document the justification in the contract file.

(F) The respondent shall submit documentation of having provided the notices required by subparagraphs (B) and (C) of this paragraph, including copies of relevant correspondence with the recipients, with its [HUB] subcontracting plan.

(G) If the state agency requests it [If the respondent selects a non-HUB business to perform a subcontract instead of a HUB that bid for the same subcontract work], the respondent shall provide [include] a written justification for its subcontractor [the] selection [in its HUB subcontracting plan]. A respondent is not required to select a small business if it determines in good faith that another subcontractor is more suitable.

(H) The respondent shall retain documentation of its compliance with each aspect of the solicitation method and submit it to the state agency upon request.

[(2) All-HUB-Subcontractors Method. The respondent may use the all-HUB-subcontractors method to demonstrate a good faith effort for any subcontracting opportunity by submitting documentation that 100% of subcontracting opportunities will be performed by HUBs.]

[(3) Meeting-or-Exceeding-HUB-Goal Method. The respondent may use the meeting-or-exceeding-HUB-goal method to demonstrate a good faith effort for any subcontracting opportunity by submitting documentation that it will utilize one or more HUBs to perform subcontracts with a total value that will meet or exceed the HUB utilization goal identified by the procuring state agency in the solicitation.]

(2) [(4)] Self-performing Method. This rule does not require a respondent to subcontract any portion of any contract. The respondent may use the self-performing method to demonstrate a good faith effort for any subcontracting opportunity by indicating that [providing a statement of how] it intends to fulfill the entire contract, including each subcontracting opportunity, with its own equipment, supplies, materials, and employees. The respondent shall provide the following if requested by the procuring state agency:

(A) evidence of existing staffing to meet contract objectives;

(B) monthly payroll records showing employees engaged in the contract;

(C) on-site reviews of company headquarters or work site where services are to be performed; and

(D) documentation proving employment of qualified personnel holding the necessary licenses and certificates required to perform the work.

(3) [(5)] Subcontracting to a HUB Protégé. Under Government Code, §2161.253, if [If] the respondent is a mentor in a mentor-protégé agreement under Government Code, §2161.065 [that is registered with the comptroller under §20.298 of this title (relating to Mentor-Protégé Program)], the respondent may demonstrate a good faith effort for any subcontracting opportunity by subcontracting the work to its protégé.

(4) [(6)] The respondent shall use the HUB directory to identify HUBs. If the respondent uses any alternate source, it accepts the risk that its [HUB] subcontracting plan may be noncompliant due to inaccurate HUB certification information. A business listed in the HUB directory at the time of the good faith effort is considered a HUB for purposes of evaluating a subcontracting plan, even if the business later graduates or has its HUB status revoked or expired.

(e) Accepting or rejecting the [HUB] subcontracting plan. The state agency shall review the respondent's [HUB] subcontracting plan prior to award. The [HUB] subcontracting plan shall become a provision of the state agency's contract. The agency and contractor may agree to revise the submitted [HUB] subcontracting plan in accordance with subsection (b)(4) of this section. State agencies shall review the documentation submitted by the respondent to determine if the respondent made a good faith effort. A state agency may reject [If the state agency determines that] a [HUB] subcontracting plan that was not developed in good faith or [the good faith effort] was not completed [incomplete, the state agency shall reject the response]. The state agency shall document the reasons for rejection in the contract file. If an agency finds that businesses identified in a subcontracting plan are no longer HUBs, it may invite the vendor to submit a revised plan that identifies active HUBs.

(f) Contractor records. The contractor shall maintain records documenting its compliance with the [HUB] subcontracting plan.

(g) Progress assessment reports. The contractor shall submit a progress assessment report to the state agency with each invoice, in the format required by the comptroller. A state agency may, at its option, allow electronic submissions of the compliance report required by this subsection so long as the electronically-submitted compliance reports are in the format and contain all information required by the comptroller. The progress assessment report shall be a condition for payment.

(h) Monitoring [HUB] subcontracting plan compliance.

(1) During the term of the contract, the state agency shall monitor the contractor's subcontracting by reviewing each HUB progress assessment report to determine whether it complies with the [HUB] subcontracting plan. The state agency shall perform monitoring at intervals corresponding to invoice submissions. The state agency shall determine if the value of the payments to HUBs meets or exceeds the [HUB] subcontracting plan, and whether the contractor is utilizing only subcontractors named in the [HUB] subcontracting plan. The state agency shall document the contractor's performance in the contract file.

(2) To determine if the contractor is complying with the [HUB] subcontracting plan, the state agency may consider the following:

(A) whether the contractor gave timely notice to the subcontractor regarding the time and place of the subcontracted work;

(B) whether the contractor facilitated access to the resources needed to complete the work; and

(C) any other information the state agency considers relevant.

(3) If the contractor fails to comply with the [HUB] subcontracting plan, the state agency shall notify the contractor of the deficiencies and give the contractor an opportunity to submit documentation and explain why its failure to fulfill the [HUB] subcontracting plan should not be attributed to a lack of good faith effort by the contractor. Any deficiencies identified by the state agency must be rectified by the contractor prior to the next reporting period.

(4) The state agency shall report failure to comply with the [HUB] subcontracting plan to the comptroller in accordance with §20.509 of this title (relating to Vendor Performance Reporting). If the state agency determines that the contractor failed to implement the [HUB] subcontracting plan in good faith, the state agency may, in addition to any other remedies, bar the contractor from further contracting opportunities with the agency. The state agency may also report nonperformance to the comptroller for consideration for possible debarment pursuant to Government Code, §2155.077. A debarment for failure to implement the [HUB] subcontracting plan may be for a period of no more than five years.

(i) Amending the [HUB] subcontracting plan.

(1) Before the contractor performs or subcontracts any part of the contract in a manner that is not consistent with its [HUB] subcontracting plan, it shall submit an amended [HUB] subcontracting plan to the state agency for its review and approval. The contractor shall demonstrate good faith by complying with the requirements of subsection (d) of this section in the development of the amended [HUB] subcontracting plan. Failure to comply with this section may be deemed a breach of the contract subject to any remedies provided by Government Code, Chapter 2161 and other applicable law.

(2) The state agency may approve requested changes to the [HUB] subcontracting plan by amending the contract. The reasons for amending the [HUB] subcontracting plan shall be recorded in the contract file.

(3) If a state agency expands the scope of work through a change order or contract amendment, including a renewal that expands the scope of work, it shall determine if the additional scope of work contains additional probable subcontracting opportunities. If the state agency determines probable subcontracting opportunities exist, the state agency shall require the contractor to submit for its review and approval an amended [HUB] subcontracting plan for the additional probable subcontracting opportunities. The contractor shall demonstrate good faith by complying with the requirements of subsection (d) of this section in the development of the amended [HUB] subcontracting plan.

§20.288. Certification Process.

(a) A business seeking certification as a HUB must submit an application through the online HUB certification system, affirming under penalty of perjury that the business qualifies as a HUB.

(b) If requested by the comptroller, the applicant must provide any and all materials and information necessary to demonstrate a qualifying active participation in the control, operation, and management of the HUB.

(c) A person claiming Texas residency must prove residency status by submitting:

(1) a current valid Texas driver's license or I.D. card; and

(2) additional evidence of residency satisfactory to the comptroller, such as an appraisal statement for Texas real property (including whether a homestead exemption was claimed for that real property) or most recent paid utility statements.

(d) The comptroller shall certify the applicant as a HUB or provide the applicant with written justification of its denial of certification within 90 days after the date the comptroller receives an application.

(e) The comptroller may reject an application based on one or more of the following:

(1) the application is not satisfactorily completed;

(2) the applicant does not meet the requirements of the definition of HUB;

(3) the application contains false information;

(4) the applicant does not provide required information in connection with the certification review conducted by the comptroller; or

(5) the applicant has an unfavorable record of performance on prior contracts with the state.

(f) The comptroller may approve the existing certification program of one or more local governments or nonprofit organizations in this state that certify historically underutilized businesses, minority business enterprises, women's business enterprises, or disadvantaged business enterprises that substantially fall under the same definition, to the extent applicable for HUBs found in Government Code, §2161.001, subject to the prohibition against race- and sex-based discrimination imposed by Texas Constitution, Article I, Section 3a, and United States Constitution, Amendment XIV, and maintain them on the comptroller's HUB directory, if the local government or nonprofit organization:

(1) meets or exceeds the standards established by the comptroller and

(2) agrees to the terms and conditions as required by statute relative to the agreement between the local government or nonprofits for the purpose of certification of HUBs.

(g) The agreement in subsection (f) of this section must take effect immediately and contain conditions as follows:

(1) allow for automatic certification of businesses certified by the local government or nonprofit organization as prescribed by the comptroller;

(2) provide for the efficient updating of the HUB directory;

(3) provide for a method by which the comptroller may efficiently communicate with businesses certified by the local government or nonprofit organization;

(4) provide those businesses with information about the state's Historically Underutilized Business Program; and

(5) require that a local government or nonprofit organization that enters into an agreement under subsection (f) of this section, complete the certification of an applicant with written justification of its certification denial within the period established by the comptroller in its rules for certification.

(h) The comptroller will not accept the certification of a local government or nonprofit organization that charges money for the certification of businesses to be listed on the HUB directory.

(i) The comptroller may terminate an agreement made under this section if a local government or nonprofit organization fails to meet the standards established by the comptroller for certifying HUBs. In the event of the termination of an agreement, those HUBs that were certified as a result of the agreement will maintain their HUB status during the fiscal year in which the agreement was in effect. Businesses which are removed from the HUB directory as a result of the termination of an agreement with a local government or nonprofit organization may apply to the comptroller for certification.

(j) The certification is valid for a four-year period beginning on the date the comptroller certifies the applicant as a HUB. If the certification was granted by an organization other than the comptroller under subsections (f) and (g) of this section, it is valid for the period granted by that organization.

§20.294. Graduation Procedures.

(a) Size Standards. A HUB shall graduate from being eligible for HUB certification when it has maintained gross receipts or total employment levels during four consecutive years which, including all affiliates, exceed the U.S. Small Business Administration size standards set forth in 13 CFR Part 121.

(b) Graduation. [Businesses that achieve the size standards identified in subsection (a) of this section have reached a competitive status in overcoming the effects of discrimination.] The comptroller shall review, as part of the certification or recertification process, the financial revenue or relevant data of a business to determine whether the size standards identified in subsection (a) of this section have been achieved. When the comptroller determines that the business exceeds the applicable size standard, the comptroller shall inform the business that it has graduated and is no longer certified as a HUB, and shall remove the business from the HUB directory.

(c) Effects of Graduation.

(1) Businesses that have graduated from the HUB program may not be included in meeting statewide or state agency HUB utilization goals after the end of last reporting period in which they held certification for at least one day.

(2) A business that has graduated or does not qualify as a HUB under this title, shall be eligible to reapply for HUB certification only after demonstrating that it meets the qualifications for HUB, including the size standards.

(3) A business is considered a successor in interest if it has acquired substantially all of the assets and liabilities of another business. The application of the successor in interest to a HUB that has graduated will be treated as a reapplication of the HUB. The successor in interest applicant must show that it meets the size standards before it is considered eligible to apply.

§20.295. Program Review.

[The comptroller shall revise the HUB rules based on updates of disparity studies conducted and prepared on behalf of the State of Texas.] The comptroller may determine the need to reassess the HUB rules [upon receipt of new disparity study information].

§20.296. HUB Coordinator Responsibilities.

(a) In accordance with Government Code, §2161.062(e), state agencies with biennial budgets that exceed $10 million shall designate a staff member to serve as the Historically Underutilized Business (HUB) Coordinator for the state agency during the fiscal year. The HUB coordinator will advise and assist state agency executive directors and staff in complying with the requirements of this division, Government Code, §321.013, and §2101.011, and Government Code, Chapter 2161.

(b) To demonstrate good faith effort, a state agency shall provide the HUB coordinator with necessary and sufficient resources from its current operations and budget to effectively promote the achievement of all the responsibilities of the HUB coordinator. The HUB coordinator will assist its state agency in the development of the state agency's procurement specifications, [HUB] subcontracting plans, and evaluation of contracts for compliance. The HUB coordinator should be in a position that reports, communicates, and provides information directly to the state agency's executive director. To assist state agencies and the comptroller with HUB compliance, the duties and responsibilities of HUB coordinators include, but are not limited to, facilitating compliance with the state agency's good faith effort criteria, HUB reporting, contract administration, and marketing and outreach efforts for HUB participation. The comptroller may assist agencies, upon request, to identify other responsibilities of a HUB coordinator for compliance.

(c) The HUB coordinator shall carry out their duties on a race-neutral, ethnicity-neutral, and sex-neutral basis, mindful that the Texas and U.S. Constitutions prohibit discrimination and require equal protection under the law.

§20.298. Mentor-Protégé Program.

(a) The Mentor-Protégé Program is a program administered by the comptroller in accordance with Government Code, §2161.065, and implemented by state agencies. The purpose of the Mentor-Protégé Program is to foster long-term relationships between experienced contractors and HUBs and to increase the ability of HUBs to obtain and perform contracts and subcontracts for state agency business. Each state agency with a biennial appropriation that exceeds $10 million shall implement the Mentor-Protégé Program.

(b) Each state agency that implements the Mentor-Protégé program shall consider:

(1) the needs of protégé businesses requesting to be mentored;

(2) the availability of mentors who possess unique skills, talents, and experience related to the mission of the state agency's program; and

(3) the state agency's staff and other resources.

(c) Agencies may elect to implement the Mentor-Protégé Program individually or in cooperation with other agencies, public entities, or private organizations. Agencies are encouraged to implement a Mentor-Protégé Program to address the needs of protégé businesses in the following areas:

(1) construction;

(2) commodities; and

(3) services.

(d) State agencies may consider, but are not limited to, the following factors in developing their Mentor-Protégé Program:

(1) internal procedures, including an application process, regarding the Mentor-Protégé Program which identifies the eligibility criteria and the selection criteria for mentors and potential HUB protégé businesses;

(2) recruitment of contractor mentors and protégés;

(3) documentation of the roles and expectations of the state agency, the mentor and the protégé;

(4) monitoring progress of mentor-protégé relationships;

(5) key agency resources including senior managers and procurement personnel to assist with the implementation of the program;

(6) partnerships with local governmental and nonprofit entities;

(7) the appropriate length of time for mentor-protégé relationships to continue (generally limited to four years); and

[(8) guidance related to the Mentor-Protégé Program in the Disparity Study; and]

(8) [(9)] assessment of the effectiveness of their Mentor-Protégé Program by conducting periodic surveys and interviews of mentors and protégés.

(e) A state agency's Mentor-Protégé Program implementation must include mentor eligibility and selection criteria. In determining the eligibility and selection of a mentor, state agencies shall require each mentor to be registered on the Centralized Master Bidders List (CMBL); and may additionally consider the following criteria:

(1) whether the mentor has extensive work experience and can provide developmental guidance in areas that meet the needs of the protégé, including but not limited to, business, financial, and personnel management; technical matters such as production, inventory control and quality assurance; marketing; insurance; equipment and facilities; and other related resources;

(2) whether the mentor is in "good standing" with the State of Texas and is not in violation of any state statutes, rules or governing policies;

(3) whether the mentor has mentoring experience;

(4) the number of protégés that a mentor can appropriately assist;

(5) whether the mentor has a successful past work history with the state agency;

(6) the amount of time a HUB has participated as a mentor in the program, or in other agencies' programs; and

(7) whether and to what extent the mentor and protégé businesses share management, board members, partners, current or former employees, or other resources that might indicate that they are related or affiliated businesses.

(f) A state agency's Mentor-Protégé Program implementation must include protégé eligibility and selection criteria. In determining the eligibility and selection of HUB protégés, state agencies may use the following criteria:

(1) whether the protégé is eligible and willing to become certified as a HUB;

(2) whether the protégé's business has been operational for at least one year;

(3) whether the protégé is willing to participate with a mentor and will identify the type of guidance that is needed for its development;

(4) whether the protégé is in "good standing" with the State of Texas and is not in violation of any state statutes, rules, or governing policies;

(5) whether the protégé is involved in a mentoring relationship with another contractor;

(6) the amount of time a HUB has participated as a protégé in the program, or in other agencies' programs; and

(7) whether and to what extent the mentor and protégé businesses share management, board members, partners, employees, or other resources that might indicate that they are related or affiliated businesses.

(g) The mentor and the protégé should agree on the nature of their involvement under the state agency's Mentor-Protégé Program. The state agency will monitor the progress of the relationship. The mentor and protégé relationship should be reduced to writing and may include, but is not limited to, the following:

(1) identification of the developmental areas in which the protégé needs guidance;

(2) the time period which the developmental guidance will be provided by the mentor;

(3) points of contact that will oversee the agreement of the mentor and protégé;

(4) procedure for a mentor to notify the protégé in advance if it intends to withdraw from the program or terminate the mentor-protégé relationship;

(5) procedure for a protégé to notify the mentor in advance if it intends to terminate the mentor-protégé relationship; and

(6) a mutually agreed upon timeline to report the progress of the mentor-protégé relationship to the state agency.

(h) The protégé must maintain its HUB certification status for the duration of the agreement.

(i) Each state agency must notify its mentors and protégés that participation is voluntary. The notice must include written documentation that participation in the state agency's Mentor-Protégé Program implementation is neither a guarantee of a contract opportunity nor a promise of business; but the program's intent is to foster positive long-term business relationships.

(j) State agencies may demonstrate their good faith under this section by submitting a supplemental letter with documentation to the comptroller with their HUB report or legislative appropriations request identifying the progress and testimonials of mentors and protégés that participate in the state agency's program.

(k) Each state agency that implements the Mentor-Protégé Program must report that information to the comptroller upon completion of a signed agreement by both parties. Information regarding the Mentor-Protégé Agreement shall be reported in a form prescribed by the comptroller within 21 calendar days after the agreement has been signed. The comptroller will register that agreement on the approved list of mentors and protégés. Approved Mentor-Protégé Agreements are valid for all state agencies in determining good faith effort for the particular area of subcontracting to be performed by the protégé as identified in the [HUB] subcontracting plan.

(l) The comptroller shall retain and make available to state agencies all registered Mentor-Protégé Agreements. The sponsoring state agency shall monitor and report the termination of an existing Mentor-Protégé Agreement that has been registered with the comptroller within 21 calendar days.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 2, 2026.

TRD-202601062

Don Neal

General Counsel, Operations and Support Legal Services

Comptroller of Public Accounts

Earliest possible date of adoption: April 12, 2026

For further information, please call: (512) 475-2220

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