1.1A bill for an act1.2relating to state government; providing for enhancement of accountability and 1.3transparency in public construction; establishing a requirement for a definition 1.4of responsible contractor;proposing coding for new law in Minnesota Statutes, 1.5chapter 16C.1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:1.7    Section 1. [16C.285] RESPONSIBLE CONTRACTOR REQUIREMENT 1.8DEFINED.1.9    Subdivision 1.Definitions.(a) For purposes of this section, the terms defined in this 1.10subdivision have the meanings given them.1.11(b) "Construction contract" means a contract or subcontract of any tier for work on 1.12a project.1.13(c) "Contractor" means a vendor that submits a bid or proposal or otherwise responds 1.14to a solicitation document of a contracting authority for work on a project. A contractor 1.15includes a construction manager but does not include a material supplier.1.16(d) "Contracting authority" means a state agency, the Minnesota State Colleges and 1.17Universities, the University of Minnesota, the Metropolitan Council, the Metropolitan 1.18Airports Commission, or a municipality that enters into a construction contract or 1.19authorizes or directs entering into a construction contract.1.20(e) "Municipality" means a county, town, home rule charter or statutory city, school 1.21district, housing and redevelopment authority, port authority, economic development 1.22authority, sports facilities authority, joint powers board or organization created under 1.23section 471.59 or other statute, special district, drainage authority, watershed district, 1.24destination medical center corporation, or other municipal corporation or political 1.25subdivision of the state authorized by law to enter into contracts.2.1(f) "Prime contractor" means a contractor awarded a construction contract by a 2.2contracting authority for work on a project.2.3(g) "Principal" means an owner holding at least a 25 percent ownership interest 2.4in a business.2.5(h) "Project" means building, erection, construction, alteration, remodeling, 2.6demolition, or repair of buildings, real property, highways, roads, bridges, or other 2.7construction work performed pursuant to a construction contract.2.8(i) "Related entity" means:2.9(1) a firm, partnership, corporation, joint venture, or other legal entity substantially 2.10under the control of a contractor or vendor;2.11(2) a predecessor corporation or other legal entity having one or more of the same 2.12principals as the contractor or vendor;2.13(3) a subsidiary of a contractor or vendor;2.14(4) one or more principals of a contractor or vendor; and  2.15(5) a person, firm, partnership, corporation, joint venture, or other legal entity that 2.16substantially controls a contractor or vendor.2.17(j) "Solicitation document" means an invitation to bid, bid specifications, request for 2.18proposals, request for qualifications, or other solicitation of contractors for purposes of 2.19a construction contract.2.20(k) "Subcontractor" means a vendor that seeks to enter into a subcontract or enters 2.21into a subcontract for work on a project.2.22(l) "Vendor" means a business, including a construction contractor or a natural 2.23person, and includes both if the natural person is engaged in a business.2.24    Subd. 2.Responsible contractor required.(a) A contractor must meet the 2.25minimum criteria in subdivision 3 to be eligible to be awarded a construction contract 2.26as the lowest responsible bidder or the vendor or contractor offering the best value as 2.27provided in section 16C.28, 103D.811, 103E.505, 116A.13, 123B.52, 160.17, 160.262, 2.28161.32, 161.3206, 161.3209, 161.38, 162.17, 365.37, 374.13, 375.21, 383C.094, 412.311, 2.29429.041, 458D.21, 469.015, 469.068, 469.101, 471.345, 473.4057, 473.523, 473.652, 2.30473.756, 473J.11, or any of their successor provisions. 2.31(b) This section applies to publicly owned or financed projects where the contracting 2.32authority's construction contract with the prime contractor is estimated to exceed $50,000 2.33and is awarded pursuant to a lowest responsible bidder selection method or a best value 2.34selection method.  A subcontractor must meet the minimum criteria in subdivision 3 to be 2.35eligible to be awarded a subcontract on a project regardless of the value of the subcontract.3.1(c) If only one contractor responds to a solicitation document, a contracting authority 3.2may award a construction contract to the responding contractor even if the minimum 3.3criteria in subdivision 3 are not met.3.4    Subd. 3.Minimum criteria. "Responsible contractor" means a contractor or 3.5subcontractor that conforms to the responsibility requirements in the solicitation document 3.6for its portion of the work on the project and verifies that it meets the following minimum 3.7criteria:3.8(1) the contractor or subcontractor: 3.9(i) is in compliance with workers' compensation and unemployment insurance 3.10requirements;3.11(ii) is currently registered with the Department of Revenue and the Department of 3.12Employment and Economic Development if it has employees;3.13(iii) has a valid federal tax identification number or a valid Social Security number if 3.14an individual; and3.15(iv) has filed a certificate of authority to transact business in Minnesota with the 3.16secretary of state if a foreign corporation or cooperative;3.17(2) the contractor, subcontractor, or related entity is in compliance with and, during 3.18the three-year period before submitting the verification, has not violated section 177.24, 3.19177.25, 177.41 to 177.44, 181.13, 181.14, or 181.722, and has not violated United States 3.20Code, title 29, sections 201 to 219, or United States Code, title 40, sections 3141 to 3.213148. For purposes of this clause, a violation occurs when a contractor, subcontractor, or 3.22related entity: 3.23(i) willfully or repeatedly fails to pay statutorily required wages or penalties of 3.24$25,000 or more on one or more separate projects within the three-year period;3.25(ii) has been issued an order to comply by the commissioner of labor and industry 3.26that has become final;3.27(iii) has been issued at least two determination letters within the three-year period 3.28by the Department of Transportation finding an underpayment by the contractor, 3.29subcontractor, or related entity to its own employees; or3.30(iv) has been found liable for underpayment of wages or penalties in an action 3.31brought in a court having jurisdiction.3.32Provided that, if the contractor, subcontractor, or related entity contests a determination 3.33of underpayment by the Department of Transportation in a contested case proceeding, 3.34a violation does not occur until the contested case proceeding and any appeals have 3.35concluded with a determination that the contractor, subcontractor, or related entity 3.36underpaid wages or penalties;4.1(3) the contractor, subcontractor, or related entity is in compliance with and, during 4.2the three-year period before submitting the verification, has not violated any municipality's 4.3requirements for payment of wages for construction work performed for that municipality 4.4as provided in ordinance, resolution, policy, or contractual provision. For purposes of this 4.5clause, a violation occurs when a municipality determines that a contractor, subcontractor, 4.6or related entity has willfully or repeatedly failed to pay wages or penalties required by the 4.7municipality in the amount of $25,000 or more on one or more separate projects within the 4.8three-year period. Provided that, if the contractor, subcontractor, or related entity contests 4.9a municipality's finding of unpaid wages or penalties in a legal proceeding, a violation does 4.10not occur until the legal proceeding and any appeals have concluded with a determination 4.11that the contractor, subcontractor, or related entity underpaid wages or penalties;4.12(4) the contractor, subcontractor, or related entity is in compliance with and, during 4.13the three-year period before submitting the verification, has not violated section 181.723 4.14or chapter 326B. For purposes of this clause, a violation occurs when a contractor, 4.15subcontractor, or related entity has been issued a final administrative or licensing order;4.16(5) the contractor, subcontractor, or related entity has not operated under false names 4.17or fronts as a small business, a socially or economically disadvantaged small business, or a 4.18disadvantaged business enterprise;4.19(6) the contractor, subcontractor, or related entity has not, more than twice during 4.20the three-year period before submitting the verification, had a certificate of compliance 4.21under section 363A.36 revoked or suspended, with the revocation or suspension becoming 4.22final because it was upheld by the Office of Administrative Hearings or was not appealed 4.23to the office;4.24(7) the contractor, subcontractor, or related entity has not received a final 4.25determination assessing a monetary sanction from the Department of Administration 4.26or Transportation for failure to meet targeted group business, disadvantaged business 4.27enterprise, or veteran-owned business goals more than once during the three-year period 4.28before submitting the verification;4.29(8) the contractor, subcontractor, or related entity is not currently debarred by the 4.30federal government or the state and is currently not ineligible to be awarded a construction 4.31contract by a contracting authority or perform work under a construction contract by 4.32this section; and4.33(9) all subcontractors that the contractor or subcontractor intends to use to perform 4.34project work have verified to the contractor or subcontractor through a signed statement 4.35under oath by an owner or officer that they meet the minimum criteria listed in clauses 4.36(1) to (7).5.1    Subd. 4.Verification of compliance.A contractor responding to a solicitation 5.2document of a contracting authority shall submit to the contracting authority a signed 5.3statement under oath by an owner or officer verifying compliance with each of the 5.4minimum criteria in subdivision 3 at the time that it responds to the solicitation document.  5.5A contracting authority may accept a sworn statement as sufficient to demonstrate that a 5.6contractor is a responsible contractor and shall not be held liable for awarding a contract 5.7in reasonable reliance on that statement. Failure to verify compliance with any one of the 5.8minimum criteria or a false statement under oath in a verification of compliance shall 5.9render a contractor or subcontractor ineligible to be awarded a construction contract on the 5.10project for which the verification was submitted. A false statement under oath verifying 5.11compliance with any of the minimum criteria may result in termination of the construction 5.12contract that has already been awarded to a contractor or subcontractor that submits a false 5.13statement. A contracting authority shall not be liable for declining to award a contract 5.14or terminating a contract in reasonable reliance on a determination that the contractor 5.15failed to verify compliance with the minimum criteria or falsely stated that it meets the 5.16minimum criteria.5.17    Subd. 5.Subcontractor verification.A contractor or subcontractor shall 5.18include in its verification of compliance under subdivision 4 a list of all of its first-tier 5.19subcontractors that it intends to retain for work on the project. If the prime contractor or 5.20any subcontractor retains additional subcontractors on the project after submitting its 5.21verification of compliance, the prime contractor or subcontractor shall obtain verifications 5.22of compliance from each additional subcontractor with which it has a direct contractual 5.23relationship and shall submit a supplemental verification confirming compliance with 5.24subdivision 3, clause (8). The prime contractor shall submit to the contracting authority 5.25upon request copies of the signed verifications of compliance from all subcontractors of 5.26any tier pursuant to subdivision 3, clause (8). The prime contractor and subcontractors 5.27shall not be responsible for the false statements of any subcontractor with which they do 5.28not have a direct contractual relationship. The prime contractor and subcontractors shall 5.29be responsible for false statements by their first-tier subcontractors with which they have 5.30a direct contractual relationship only if they accept the verification of compliance with 5.31knowledge that it contains a false statement or with reckless disregard for whether the 5.32statement is true or false.5.33    Subd. 6.Additional criteria.Nothing in this section shall restrict the discretion of a 5.34contracting authority to establish additional criteria for defining a responsible contractor.5.35    Subd. 7.Implementation.The definition of responsible contractor, as defined in 5.36subdivision 3, or a statement that a responsible contractor must comply with section 6.116C.285, subdivision 3, shall be included in the solicitation document for all projects 6.2covered by this section. The solicitation document for any project shall state that any 6.3contractor or subcontractor that does not meet the minimum criteria in subdivision 3 is 6.4not a responsible contractor and is not eligible to be awarded a construction contract for 6.5the project or to perform work on the project. The solicitation document shall provide 6.6that a false statement under oath verifying compliance with any of the minimum criteria 6.7may result in termination of the contract awarded to the contractor or subcontractor that 6.8submits a false statement. The solicitation document shall state that the prime contractor 6.9shall submit to the contracting authority upon request copies of the signed verifications of 6.10compliance from all subcontractors of any tier pursuant to subdivision 3, clause (8).6.11    Subd. 8.Effective date. This section is effective January 1, 2015, and shall apply 6.12to all construction contracts entered into based on solicitation documents issued on or 6.13after that date.