AN ACT CONCERNING THE STATE SET-ASIDE PROGRAM.

This bill makes several changes to the state small and minority business set-aside program, including requiring certain agencies to explain how they will meet their set-aside program goals, changing the definition of small contractor, requiring an explanation when a set-aside contractor employs a subcontractor who is ineligible for the program, and requiring awarding authorities to send notices of alleged set-aside violations to the Commission on Human Rights and Opportunities (CHRO). It eliminates obsolete language that created an alternative method for calculating the number of set-aside contracts at a time when the value of contracts to be set aside was a minimum of 15% and a maximum of 25% of the average of contracts awarded over three fiscal years.

The bill requires substantial subcontractors to prequalify with the Department of Administrative Services (DAS) before they perform work on a state or municipal construction contract. It also makes minor changes to the contractor prequalification laws.

Lastly, the bill prohibits the state from contracting with corporations that receive a tax benefit as a result of reincorporating outside of the United States.

EFFECTIVE DATE: January 1, 2007, except that the provisions regarding DAS regulations and bonded construction projects are effective upon passage.

By law, state and quasi-public agencies and political subdivisions, other than municipalities, must set aside a percentage of the contracts they award for construction, goods, and services each year for small contractors and minority business enterprises. Excluded from the requirement are contracts (1) that may not be set aside under federal law or regulations or (2) for goods and services that are not customarily provided by small contractors.

Each agency or political subdivision must set set-aside goals and send CHRO and DAS quarterly status reports. The bill requires any agency that does not achieve at least 75% of its goal by the end of the third reporting period in any 12 months beginning on July 1 to give CHRO a detailed written explanation of how it will achieve its goal in the final reporting period.

To qualify as a small contractor under current law, a business must, among other things, have grossed no more than $ 10 million in its most recently completed fiscal year. The bill replaces this condition with a size standard that DAS establishes for the business sector in which a contractor, subcontractor, manufacturer, or service company operates. It removes a prohibition against the DAS commissioner awarding a small contractor a contract or contracts totaling in excess of $ 10 million in a fiscal year.

The bill requires the commissioner to adopt regulations that establish the size standards. She must include in each size standard businesses with a maximum of 25 employees and annual gross sales of up to $ 10 million.

Set-Aside Contractors Contracts With Ineligible Subcontractors and Notice Requirements

The bill requires an agency that awards a set-aside contract to obtain from that contractor, before any work begins, a written explanation detailing any subcontract it has with a business that is not eligible under the set-aside program. By law, a contractor that is awarded a set-aside contract, together with set-aside-eligible subcontractors, must perform at least 25% of the work done under such a contract.

Just as they can with other set-aside program violations, the bill permits awarding agencies, after notice and a hearing, to impose a civil penalty of up to $ 10,000 on contractors who willfully violate its explanation requirement. It requires, rather than allows, them to send the notice by certified mail, return receipt requested. It also requires the authorities to send a copy of the notice to CHRO.

The bill eliminates a requirement for the DAS to print and provide an updated directory of small contractors and minority business enterprises certified to participate in the set-aside program. Instead, it requires the department maintain an updated directory on its website.

Beginning January 1, 2007, the bill requires substantial subcontractors to prequalify with DAS before they perform work estimated to cost more than $ 500,000 on a state or municipal construction contract. Like contractors, the prequalification requirement does not apply to substantial subcontractors who work on UConn projects. The prequalification procedures, range of application fees, and possible penalties for violations are generally the same as those under existing law for prequalified contractors.

The bill eliminates a requirement for applicants to include in their application their experience on private and public construction projects over the immediately preceding five years or their 10 most recently completed projects and the names of any subcontractors they used on them. This effectively gives the DAS commissioner a broader review of applicants' experiences. However, the bill requires her at least to look at experiences during the immediately preceding three years.

The bill requires the commissioner to adopt regulations establishing a schedule of applicable fees for subcontractors required to prequalify. The existing application fees for contractors are based on aggregate work capacity ratings and range from $ 600 for a rating of $ 5 million or less to $ 2,500 for a rating over $ 40 million. The bill eliminates the $ 600 floor on the prequalification renewal fee and prohibits the fee from being less than, rather than equal to, one-half of the initial application fee.

The bill eliminates a requirement for contractors to include a list of their non-bonded projects in the update statements that they must submit with (1) each bid on a state construction contract and (2) applications to renew or upgrade their prequalification certificate. It leaves unchanged a requirement that they include in these statements (1) a list of bonded projects, (2) the names and qualifications of personnel who will supervise any new contract they are bidding on, (3) any significant change in their financial position or corporate structure since the certificate was issued or renewed, and (4) any other relevant information the DAS commissioner prescribes. By law, the commissioner must establish the form.

The bill prohibits a public agency from receiving any state funds for construction if it accepts a bid without the bidder's prequalification certificate or update statement.

By law, public agencies must evaluate the performance of contractors and subcontractors working on public projects. The bill allows municipalities to meet this requirement by relying on a contractor's evaluation of his subcontractors.

The bill requires DAS to require each publicly traded corporation seeking to do business with the state to certify in an affidavit that it is not a company that (1) was previously incorporated, and conducted business, in the U. S. ; (2) reincorporated outside of the U. S. on or after July 1, 2005; and (3) owed less federal or state taxes because of the reincorporation. The bill prohibits the state from contracting with corporations that fail to make the certification, except the attorney general may waive the prohibition if (1) the services the state is seeking are not available from a company incorporated in the U. S. or (2) the waiver is in the state's best interest.

SB 224, favorably reported by the Planning and Development Committee, requires municipalities to comply with the state set-aside law if they enter into public works contracts that are at least partially state-funded.

Yea

Nay

(03/14/2006)