HUB Subcontracting Plans: If you fail to prepare, prepare to fail
When a government contract has an expected value of $100,000 or more and the state agency determines there is a probability for subcontracting opportunities under the contract, each vendor’s bid must include a historically underutilized business (HUB) subcontracting plan. If you’re a government contractor or want to become one, you must understand how to properly complete a HUB subcontracting plan. If your HUB subcontracting plan fails, so does your bid.
Texas adopted a historically underutilized business (HUB) program in 1991 to increase the opportunities available to businesses owned by minorities and women in state procurement and contracting.
The statewide HUB goals are:
- 11.2% for heavy construction other than building contracts;
- 21.1% percent for all building construction, including general contractors and operative builders’ contracts;
- 32.9% percent for all special trade construction contracts;
- 23.7% percent for professional services contracts;
- 26.0% percent for all other services contracts; and
- 21.1% percent for commodities contracts.[1]
Agencies can set their own HUB goals higher or lower than the statewide goals, but the statewide HUB goals should be used as a starting point.[2]
Agencies may achieve the statewide and/or agency-specific HUB goals by contracting directly with HUBs or indirectly through subcontracting opportunities.
Every state agency is required to “make a good faith effort to assist HUBs in receiving a portion of the total contract value of all contracts that the state agency expects to award in a fiscal year.”[3]
What is a HUB subcontracting plan and when is it required?
The HUB subcontracting plan essentially explains and documents the prime contractor’s “good faith effort” to find and subcontract with Texas certified HUBs.
When a government contract has an expected value of $100,000 or more, the state agency must determine whether there will be subcontracting opportunities under the contract. If the state agency determines that there is that probability, the state agency must require each vendor’s bid to include a HUB subcontracting plan (often referred to as a “HSP”).[4]
Every vendor submitting a bid must complete a HUB subcontracting plan that demonstrates their good faith effort to utilize Texas certified HUBs for subcontracting opportunities.
The HUB subcontracting plan subsequently becomes a provision of the awarded contract and is monitored for compliance by the state agency during the term of the contract.[5]
Bid responses that don’t included a completed HUB subcontracting plan are considered materially non-responsive and will be rejected by the agency.[6]
If a properly submitted HUB subcontracting plan contains minor deficiencies (e.g., failure to sign or date the plan, failure to submit already-existing evidence that three HUBs were contacted), the state agency may contact the respondent for clarification if the submitted plan contains sufficient evidence that the respondent developed and submitted the plan in good faith.[7]
“Good faith effort” required
After dividing the contract work “into reasonable lots or portions to the extent consistent with prudent industry practices,” and taking into consideration the scope of work to be performed under the proposed contract, including all potential subcontracting opportunities, the vendor must determine what portions of work (if any) will be subcontracted.
If any of the work will be subcontracted, the vendor must identify the percentage of the contract that it expects to award to Texas certified HUBs and the percentage that it expects to award to non-HUBs.
If you are using only Texas certified HUBs to perform all of the subcontracting opportunities, OR if the aggregate expected percentage of the contract you will subcontract with Texas certified HUBs with which you do not have a continuous contract in place with for more than five (5) years meets or exceeds the HUB goal, then you should complete “Method A (Attachment A)” to the HUB subcontracting plan.
If you don’t complete Method A (and you aren’t self-performing the entire contract yourself), you must complete “Method B (Attachment B)” to the HUB subcontracting plan. Method B essentially requires you to make a good faith effort to notify Texas certified HUBs and trade organizations or development centers about the subcontracting opportunities. There are very specific requirements for how to do this, as detailed in the HUB subcontracting plan itself.
You should carefully read the agency’s instructions for completing the HUB subcontracting plan. Even if you’ve submitted a dozen HUB subcontracting plans, re-read the instructions with fresh eyes each time.
The HUB subcontracting plan process is pass/fail—if your HUB subcontracting plan fails, so does your bid. There’s no room for error.
What if I don’t need any subcontractors?
If a vendor is able to fulfill all of the potential subcontracting opportunities with its own equipment, supplies, materials, and/or equipment, the vendor must still provide a completed HUB subcontracting plan that provides a statement explaining how they intend to fulfill all of the potential subcontracting opportunities with its own equipment, supplies, materials, and/or equipment.
A self-performing vendor must provide the following if requested by the state agency:
- evidence of existing staffing to meet contract objectives;
- monthly payroll records showing company staff fully engaged in the contract;
- on site reviews of company headquarters or work site where services are to be performed; and
- documentation proving employment of qualified personnel holding the necessary licenses and certificates required to perform the work.[8]
Is a consultant considered a “subcontractor”?
The Comptroller’s rules define “subcontractor” as “a person who contracts with a prime contractor to work or contribute toward completing work for a governmental entity.”[9]
The Comptroller defines “work” as “providing goods or performing services on behalf of a governmental entity pursuant to a contract.”[10] The Comptroller’s rules don’t define “goods” or “services,” but other Texas statutes and regulations do. For example, the Texas Lottery Commission defines “goods” as supplies, materials, and equipment, and defines “services” as the furnishing of skilled or unskilled labor or professional work.[11]
A consultant may be considered a “subcontractor” for purposes of the HUB subcontracting plan, but it depends on the circumstances.
If you have questions regarding a HUB subcontracting plan for a particular procurement, you should contact the state agency’s HUB program coordinator and/or experienced regulatory counsel.
[1] 34 Tex. Admin. Code § 20.284(b).
[2] 34 Tex. Admin. Code § 20.284(c).
[3] 34 Tex. Admin. Code § 20.284(d).
[4] Tex. Gov’t Code § 2161.252(a).
[5] 34 Tex. Admin. Code § 20.282(15).
[6] Tex. Gov’t Code § 2161.252(b); 34 Tex. Admin. Code § 20.285.
[7] 34 Tex. Admin. Code § 20.285(b)(4).
[8] 34 Tex. Admin. Code § 20.285(5).
[9] 34 Tex. Admin. Code § 20.282(27).
[10] 34 Tex. Admin. Code § 20.282(34).
[11] 16 Tex. Admin. Code § 401.101.