Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                        CHAPTER 352-H.F.No. 1443 
           An act relating to government operations; regulating 
          purchasing from small businesses; appropriating money; 
          amending Minnesota Statutes 1988, sections 16B.189; 
          16B.19; 16B.20, subdivision 2; 16B.21; 16B.22; 
          116J.68, subdivision 1; 136.27; 136.72; 137.31, 
          subdivisions 4, 6, and by adding a subdivision; 
          161.321, subdivisions 2, 3, and 6; 161.3211; 241.27, 
          subdivision 2; 471.345, subdivision 8; 473.142; 
          645.445, subdivision 5; proposing coding in Minnesota 
          Statutes, chapter 16B; repealing Minnesota Statutes 
          1988, sections 137.31, subdivision 3; 473.406; and 
          Laws 1984, chapter 654, article 2, section 49. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  [SMALL BUSINESS PROCUREMENTS COMMISSION.] 
    Subdivision 1.  [CREATION.] A small business procurements 
commission is created to study the small business procurement 
programs in Minnesota Statutes, sections 16B.189; 16B.19, 
subdivisions 2, 4, 5, and 6; 16B.21, subdivision 2; 16B.22; 
116J.68, subdivision 1; 136.27; 136.72; 137.31, subdivision 3; 
161.321, subdivisions 2, 3, and 6; 241.27, subdivision 2; 
471.345, subdivision 8; 473.142; 473.406, subdivisions 1, 2, 4, 
5, and 6; and 645.445, subdivision 5, in order to propose 
amendments that will conform the programs to recent United 
States Supreme Court decisions.  The commission shall take steps 
to at least: 
    (1) assure that minority and women's businesses and 
organizations know of its existence and purpose; 
    (2) determine the existence and extent of discrimination in 
Minnesota business, trade, and industry; 
    (3) recommend appropriate statutory or regulatory changes; 
and 
    (4) recommend programs targeted to small businesses in need 
of assistance. 
    Subd. 2.  [MEMBERSHIP.] The commission shall consist of 11 
members:  three members, one of which shall be of the minority 
caucus of the house of representatives appointed by the speaker, 
three members, one of which shall be of the minority caucus of 
the senate appointed by the committee on committees; three 
members appointed by the governor; and two members from the 
socially or economically disadvantaged community appointed by 
the commissioner of administration.  The attorney general or the 
attorney general's designee shall serve as a nonvoting member.  
Any vacancy shall be filled by the appointing authority. 
     Subd. 3.  [REPORT.] The commission shall report its 
findings and recommendations for legislative action to the 
governor and the legislature by January 31, 1990, and shall 
cease to function after that date. 
    Subd. 4.  [POWERS; OFFICERS.] The commission shall hold 
hearings and meetings as necessary to accomplish its purposes 
and may enter into contracts and subpoena witnesses and 
records.  It shall select from its members a chair or co-chairs 
and other officers it considers necessary. 
     Subd. 5.  [COMPENSATION, SUPPORT SERVICES.] (a) Legislative 
members of the commission shall be compensated in the same 
manner as for other legislative meetings.  Other members shall 
be compensated as provided in Minnesota Statutes, section 
15.059, subdivision 3. 
     (b) The legislative coordinating commission shall provide 
administrative and support services for the commission. 
    Sec. 2.  Minnesota Statutes 1988, section 16B.189, is 
amended to read: 
    16B.189 [CITATION AND PURPOSE.] 
    Sections 16B.19 to 16B.22 may be cited as the "Minnesota 
small business procurement act."  These sections prescribe 
procurement practices and procedures to assist in the economic 
development of small businesses and economically disadvantaged 
small businesses owned and operated by socially or economically 
disadvantaged persons. 
    Sec. 3.  Minnesota Statutes 1988, section 16B.19, is 
amended to read: 
     16B.19 [DESIGNATION OF PROCUREMENTS FROM SMALL BUSINESSES.] 
    Subdivision 1.  [SMALL BUSINESS PROCUREMENTS.] The 
commissioner shall for each fiscal year ensure that small 
businesses receive at least 25 percent of the value of 
anticipated total state procurement of goods and services, 
including printing and construction.  The commissioner shall 
divide the procurements so designated into contract award units 
of economically feasible production runs in order to facilitate 
offers or bids from small businesses.  In making the annual 
designation of such procurements the commissioner shall attempt 
(1) to vary the included procurements so that a variety of goods 
and services produced by different small businesses are obtained 
each year, and (2) to designate small business procurements in a 
manner that will encourage proportional distribution of such 
awards among the geographical regions of the state.  To promote 
the geographical distribution of set-aside awards, the 
commissioner may designate a portion of the small business 
set-aside procurement for award to bidders from a specified 
congressional district or other geographical region specified by 
the commissioner.  The failure of the commissioner to designate 
particular procurements shall not be deemed to prohibit or 
discourage small businesses from seeking the procurement award 
through the normal solicitation and bidding processes.  
    Subd. 1a.  [SMALL BUSINESS.] For purposes of sections 
16B.189 to 16B.22, "small business" means a small business, as 
defined in section 645.445, with its principal place of business 
in Minnesota. 
    Subd. 2.  [CONSULTANT, PROFESSIONAL AND TECHNICAL 
PROCUREMENTS.] Every state agency shall for each fiscal year 
designate for awarding to small businesses with their principal 
place of business in Minnesota at least 25 percent of the value 
of anticipated procurements of that agency for consultant 
services or professional and technical services.  The set-aside 
under this subdivision is in addition to that provided by 
subdivision 1, but shall otherwise comply with section 16B.17.  
At least six percent of all these procurements for consultant 
services or professional or technical services shall be set 
aside for small businesses owned and operated by socially or 
economically disadvantaged persons.  
    Subd. 3.  [NEGOTIATED PRICE OR BID CONTRACT.] The 
commissioner may elect to use either a negotiated price or bid 
contract procedure as may be appropriate in the awarding of a 
procurement contract under the set-aside or preference program 
established in sections 16B.19 to 16B.22.  The amount of an 
award may not exceed by more than five percent the 
commissioner's estimated price for the goods or services, if 
they were to be purchased on the open market and not under this 
set-aside program.  Surety bonds guaranteed by the federal Small 
Business Administration and second party bonds are acceptable 
security for a construction award under this section.  "Second 
party bond" means a bond which that designates as principal, 
guarantor, or both, a person or persons in addition to the 
person to whom the contract is proposed for award.  
    Subd. 4.  [DETERMINATION OF ABILITY TO PERFORM.] Before 
making an award under the set-aside or preference programs 
established in subdivision 5 for economically disadvantaged 
small businesses owned and operated by socially or economically 
disadvantaged persons, the commissioner shall evaluate whether 
the small business scheduled to receive the award is able to 
perform the contract.  This determination shall include 
consideration of production and financial capacity and technical 
competence.  
    Subd. 5.  [CERTAIN SMALL BUSINESS PREFERENCES AND 
SET-ASIDES.) At least nine percent of the value of all 
procurements shall be awarded, if possible, for award to 
businesses owned and operated by socially or economically 
disadvantaged persons as defined in section 645.445 with their 
principal place of business in Minnesota.  The commissioner 
shall designate set-aside procurements in a manner that will 
encourage proportional distribution of set-aside awards among 
the geographical regions of the state.  To promote the 
geographical distribution of set-aside awards, the commissioner 
may designate a portion of the set-aside for small businesses 
owned and operated by socially or economically disadvantaged 
persons for award to bidders from a specified congressional 
district or other geographical region specified by the 
commissioner and shall report annually to the governmental 
operations committees of the house of representatives and the 
senate on the use and impact of this provision.  To reach a goal 
of nine percent, the commissioner must set aside at least three 
percent of all procurements for bidding only by small businesses 
owned and operated by socially or economically disadvantaged 
persons, may The commissioner shall award a five percent 
preference in the amount bid on selected all state procurements 
to economically disadvantaged small businesses owned and 
operated by socially or economically disadvantaged persons, or 
may utilize any other bidding process authorized by this chapter 
to encourage the participation of economically disadvantaged 
small businesses in state procurement.  In the event small 
businesses owned and operated by socially or economically 
disadvantaged persons are unable to perform at least nine 
percent of the value of all procurements, the commissioner shall 
award the remainder to other small businesses.  At least 50 75 
percent of the value of the procurements awarded to economically 
disadvantaged small businesses owned and operated by socially or 
economically disadvantaged persons shall must actually be 
performed by the business to which the award is made or 
another economically disadvantaged small business owned and 
operated by a socially or economically disadvantaged person or 
persons.  The commissioner may not designate more than 20 
percent of any commodity class for set-aside or preference 
awards to businesses owned and operated by socially or 
economically disadvantaged persons.  A An economically 
disadvantaged small business owned and operated by socially or 
economically disadvantaged persons that has been awarded more 
than three-tenths of one percent of the value of the total 
anticipated procurements for a fiscal year under this 
subdivision is disqualified from receiving further set-aside or 
preference advantages for that fiscal year.  
    Subd. 6.  [CONTRACTS IN EXCESS OF $200,000; SET-ASIDE 
SUBCONTRACTS.] The commissioner, as a condition of awarding 
state procurements for construction contracts or approving 
contracts for consultant, professional, or technical 
services pursuant to under section 16B.17 in excess of $200,000, 
shall require that at least ten percent of the contract award to 
a prime contractor be subcontracted to a business owned and 
operated by a socially or economically disadvantaged person or 
persons or that at least ten percent of the contract award be 
expended in purchasing materials or supplies from said person or 
persons.  If there is no socially or economically disadvantaged 
person or persons or other small businesses able to perform the 
subcontract or to provide the supplies or materials, the 
construction contract or contract for consultant, professional, 
or technical services may be awarded notwithstanding the ten 
percent requirement provided that the ten percent requirement is 
made up in other such contracts awarded or to be awarded by the 
same agency.  Any subcontracting or purchasing of supplies and 
materials pursuant to this subdivision may not be included in 
determining the total amount of awards required by subdivisions 
1, 2, and 5.  In the event small businesses owned and operated 
by socially and economically disadvantaged persons are unable to 
perform ten percent of the prime contract award, the 
commissioner shall require that other small businesses perform 
at least ten percent of the prime contract award.  The 
commissioner may determine that small businesses owned and 
operated by socially and economically disadvantaged persons are 
unable to perform at least ten percent of the prime contract 
award prior to the advertising for bids may set goals which 
require that the prime contractor subcontract a portion of the 
contract to economically disadvantaged small businesses.  Each 
construction contractor bidding on a project over $200,000 on 
which this subcontracting is required shall submit with the bid 
a list of the economically disadvantaged small businesses owned 
and operated by socially or economically disadvantaged persons 
that are proposed to be utilized on the project with a statement 
indicating the portion of the total bid to be performed by each 
business.  The commissioner shall reject any bid to which this 
subdivision applies that does not contain this information.  
Prime contractors receiving construction contract awards in 
excess of $200,000 shall furnish to the commissioner the name of 
each business owned and operated by a socially or economically 
disadvantaged person or persons or other small business that is 
performing work or supplying supplies and materials on the prime 
contract and the dollar amount of the work performed or to be 
performed or the supplies and materials to be supplied.  Once 
the contract has been awarded, the prime contractor must use the 
socially and economically disadvantaged small business 
subcontractors proposed to be utilized on the project, unless 
the subcontractors are unable to perform in accordance with the 
award.  
    This subdivision does not apply to prime contractors that 
are themselves economically disadvantaged small businesses owned 
and operated by socially or economically disadvantaged persons, 
as duly certified pursuant to under section 16B.22. 
    Subd. 8.  [RECOURSE TO OTHER BUSINESSES.] In the event that 
subdivisions 1 to 6 do not operate to extend a contract award to 
a small business the award must be placed pursuant to the normal 
solicitation and award provisions in this chapter.  The 
commissioner shall then designate for small businesses 
additional state procurements corresponding in approximate value 
to the contract unable to be awarded pursuant to subdivisions 1 
to 6.  
    Subd. 9.  [PROCUREMENT PROCEDURES.] All laws and rules 
pertaining to solicitations, bid evaluations, contract awards, 
and other procurement matters apply equally to procurements 
designated for small businesses.  In the event of conflict with 
other rules, section 16B.18 and rules adopted under it govern, 
if section 16B.18 applies.  If it does not apply, sections 
16B.19 to 16B.22 and rules adopted under those sections govern.  
    Subd. 10.  [APPLICABILITY.] This section does not apply to 
construction contracts or contracts for consultant, 
professional, or technical services pursuant to under section 
16B.17 which that are financed in whole or in part with federal 
funds and which that are subject to federal disadvantaged 
business enterprise regulations. 
    Sec. 4.  Minnesota Statutes 1988, section 16B.20, 
subdivision 2, is amended to read: 
    Subd. 2.  [ADVISORY COUNCIL.] A small business procurement 
advisory council is created.  The council consists of 13 members 
appointed by the commissioner of administration.  A chair of the 
advisory council shall be elected from among the members.  The 
appointments are subject to the appointments program provided by 
section 15.0597.  The terms, compensation, and removal of 
members are as provided in section 15.059, but members do not 
receive per diem.  The council expires as provided in section 
15.059, subdivision 5. 
    Sec. 5.  Minnesota Statutes 1988, section 16B.21, is 
amended to read: 
    16B.21 [REPORTS.] 
    Subdivision 1.  [COMMISSIONER OF ADMINISTRATION.] The 
commissioner shall submit an annual report pursuant to section 
3.195 to the governor and the legislature with a copy to the 
commissioner of trade and economic development indicating the 
progress being made toward the objectives and goals of sections 
16B.19 to 16B.22 during the preceding fiscal year.  The 
commissioner shall also submit a quarterly report to the small 
business procurement advisory council.  These reports shall 
include the following information:  
    (1) the total dollar value and number of potential 
set-aside awards identified during this period and the 
percentage of total state procurement this figure reflects; 
    (2) the number of small businesses identified by and 
responding to the set-aside small business procurement program, 
the total dollar value and number of set-aside and other 
contracts actually awarded to small businesses with appropriate 
designation as to the total number and value of set-aside 
contracts awarded to each small business, and the total number 
of small businesses that were awarded set-aside and other 
contracts; 
    (3) the total dollar value and number of contracts awarded 
to economically disadvantaged small businesses owned and 
operated by economically or socially disadvantaged persons 
pursuant to each bidding process authorized by section 16B.19, 
subdivision 5; the total number and value of these contracts 
awarded to each economically disadvantaged small business and to 
each category of economically or socially disadvantaged persons 
as defined by section 645.445 and agency rules small business, 
and the percentages of the total state procurements the 
figures of total dollar value and the number of contracts 
awarded by each bidding process; represent. 
    (4) for each set-aside or preference contract awarded to a 
small business, the estimated additional cost to the state of 
awarding the contract; and 
    (5) the number of contracts which were designated and set 
aside pursuant to section 16B.19 but which were not awarded to a 
small business, the estimated total dollar value of these 
awards, the lowest offer or bid on each of these awards made by 
the small business, and the price at which these contracts were 
awarded pursuant to the normal procurement procedures. 
    The information required by paragraphs (1) and (2) must be 
presented on a statewide basis and also broken down by 
geographic regions within the state.  
    Subd. 2.  [COMMISSIONER OF TRADE AND ECONOMIC DEVELOPMENT.] 
The commissioner of trade and economic development shall submit 
an annual report to the governor and the legislature pursuant to 
section 3.195 with a copy to the commissioner of 
administration.  This report shall include the following 
information:  
    (1) the efforts undertaken to publicize the provisions of 
the set-aside small business procurement program during the 
preceding fiscal year; 
    (2) the efforts undertaken to identify economically 
disadvantaged small businesses including those owned and 
operated by socially or economically disadvantaged persons, and 
the efforts undertaken to encourage participation in the 
set-aside bid preference program; 
    (3) the efforts undertaken by the commissioner to remedy 
the inability of small businesses to perform on potential 
set-aside or other contract awards; and 
    (4) the commissioner's recommendations for strengthening 
the set-aside program small business and economically 
disadvantaged small business procurement program and delivery of 
services to small businesses. 
    Sec. 6.  Minnesota Statutes 1988, section 16B.22, is 
amended to read: 
    16B.22 [ELIGIBILITY; RULES.] 
    Subdivision 1.  [ELIGIBILITY.] A small business certified 
as owned and operated by socially or economically disadvantaged 
under section 645.445, subdivision 5, clause (1) or (2), persons 
is eligible to participate under the requirements of sections 
16B.19 to 16B.22 for a maximum of five years from the date of 
receipt of the first set-aside award under this program and 
after that period is not eligible to participate for another 
five years.  A small business that received its first set-aside 
award more than five years before July 1, 1985 is not eligible 
to participate for five years after July 1, 1985.  The five-year 
maximum does not apply to sheltered workshops and work activity 
programs.  An economically disadvantaged small business is not 
eligible to participate in this program if: 
    (1) The owner of the business has previously participated 
in the program and the business exceeded the time limit 
specified in section 645.445, subdivision 5, clause (4) or this 
subdivision. 
    (2) The business has exceeded the time limit specified in 
section 645.445, subdivision 5, clause (4) or this subdivision, 
and has been renamed, restructured, or otherwise reorganized. 
    Subd. 2.  [RULES.] (a) The commissioner shall adopt by rule 
additional standards and procedures for certifying that small 
businesses and economically disadvantaged small businesses owned 
and operated by socially or economically disadvantaged persons 
are eligible to participate under the requirements of sections 
16B.19 to 16B.22. The commissioner shall adopt by rule standards 
and procedures for hearing appeals and grievances and other 
rules necessary to carry out the duties set forth in sections 
16B.19 to 16B.22.  
    (b) The commissioner may make rules which exclude or limit 
the participation of nonmanufacturing business, including 
third-party lessors, brokers, franchises, jobbers, 
manufacturers' representatives, and others from eligibility 
under sections 16B.19 to 16B.22. 
    Sec. 7.  [16B.226] [CERTIFICATION.] 
    A business that is certified by the commissioner of 
administration as a small business or an economically 
disadvantaged small business is eligible to participate under 
the requirements of sections 137.31, 161.321, 471.345, and, if 
certified under section 645.445, subdivision 5, clauses (3) to 
(5), under section 473.142 without further certification by the 
contracting agency.  Personnel in state agencies currently 
involved in certifying small businesses shall be reduced 
accordingly. 
    Sec. 8.  Minnesota Statutes 1988, section 116J.68, 
subdivision 1, is amended to read: 
    Subdivision 1.  The bureau of small business within the 
business assistance center shall serve as a clearinghouse and 
referral service for information needed by small businesses 
including those operated by a socially or economically 
disadvantaged person small businesses. 
    Sec. 9.  Minnesota Statutes 1988, section 136.27, is 
amended to read: 
    136.27 [CAPITAL PROJECTS BIDDING PROCEDURES.] 
    In awarding contracts for capital projects under section 
16B.09, the board must consider the documentation provided by 
the bidders regarding their qualifications including evidence of 
having successfully completed similar work, or delivering 
services or products comparable to that being requested.  The 
board shall formulate procedures to administer this section 
which include practices that will assist in the economic 
development of small businesses and small businesses owned and 
operated by socially or economically disadvantaged 
persons economically disadvantaged small businesses.  
    Sec. 10.  Minnesota Statutes 1988, section 136.72, is 
amended to read: 
    136.72 [CAPITAL PROJECTS BIDDING PROCEDURES.] 
    In awarding contracts for capital projects under section 
16B.09, the state board for community colleges shall consider 
the documentation provided by the bidders regarding their 
qualifications, including evidence of having successfully 
completed similar work, or delivering services or products 
comparable to that being requested.  The board shall set 
procedures to administer this section, which must include 
practices that will assist in the economic development of small 
businesses and small businesses owned and operated by socially 
or economically disadvantaged persons economically disadvantaged 
small businesses. 
     Sec. 11.  Minnesota Statutes 1988, section 137.31, is 
amended by adding a subdivision to read: 
    Subd. 3a.  [BID PREFERENCE.] The regents shall award a five 
percent preference in the amount bid on all university 
procurement to economically disadvantaged small businesses, as 
defined in section 645.445.  At least 75 percent of the value of 
the procurements awarded to economically disadvantaged small 
businesses must actually be performed by the business to which 
the award is made or another economically disadvantaged small 
business.  An economically disadvantaged small business that has 
been awarded more than three-tenths of one percent of the value 
of the total anticipated procurements for a fiscal year under 
this subdivision is disqualified from receiving further bid 
preferences for that fiscal year.  An economically disadvantaged 
small business is not eligible to participate in the bid 
preference established under this subdivision under conditions 
specified in section 16B.22, subdivision 1. 
     Sec. 12.  Minnesota Statutes 1988, section 137.31, 
subdivision 4, is amended to read: 
    Subd. 4.  [REPLACEMENT CONTRACTS.] If a procurement 
contract designated for the set-aside program cannot be awarded 
to a small business under the conditions prescribed in 
subdivisions 1 to 3, and 2 the award shall be placed in 
accordance with the regular procurement policies of the 
university.  In this event, the university shall designate as a 
replacement a procurement contract of comparable value to be 
included in the university set-aside program during that fiscal 
year if practicable.  
     Sec. 13.  Minnesota Statutes 1988, section 137.31, 
subdivision 6, is amended to read: 
    Subd. 6.  [ANNUAL REPORT.] The University of Minnesota 
shall submit an annual report as provided in section 3.195, to 
the governor and the legislature, with a copy to the 
commissioner of trade and economic development, indicating the 
progress being made toward the objectives and goals of this 
section.  The report shall include the following information: 
    (a) The total dollar value and number of procurement 
contracts identified and set aside during this period and the 
percentage of total value of university procurements that this 
figure reflects; 
    (b) The number of small businesses identified by and 
responding to the university set-aside program, the total dollar 
value and number of procurement contracts actually awarded to 
small businesses with appropriate designation as to the total 
number and value of procurement contracts awarded to each small 
business, and the total number of small businesses that were 
awarded procurement contracts; 
    (c) The total dollar value and number of procurement 
contracts awarded to economically disadvantaged small businesses 
owned and operated by economically or socially disadvantaged 
persons with appropriate designation as to the total number and 
value of procurement contracts awarded to each small business, 
and the percentages of the total value of university 
procurements the figures of total dollar value and the number of 
procurement contracts reflect; and 
    (d) The number of procurement contracts which were 
designated and set aside pursuant to this section but which were 
not awarded to a small business, the estimated total dollar 
value of these awards, the lowest offer or bid on each of these 
awards made by the small business and the price at which these 
contracts were awarded pursuant to regular procurement 
procedures. 
    Sec. 14.  Minnesota Statutes 1988, section 161.321, 
subdivision 2, is amended to read: 
    Subd. 2.  [SMALL BUSINESS SET ASIDES.] The commissioner 
shall set aside, on a fiscal year basis, at least two five 
percent of the construction work to be performed by contract for 
award to small businesses, small businesses owned and operated 
by socially or economically disadvantaged persons and small 
businesses owned and operated by physically handicapped 
persons or economically disadvantaged small businesses or for 
award to businesses which guarantee use of such small businesses 
or economically disadvantaged small businesses as subcontractors.
    Sec. 15.  Minnesota Statutes 1988, section 161.321, 
subdivision 3, is amended to read: 
    Subd. 3.  [AWARDS TO MINORITY SMALL BUSINESSES.] At 
least 50 75 percent of the amount so set aside shall must be 
awarded, if possible, either to economically disadvantaged small 
businesses owned and operated by socially and economically 
disadvantaged persons as direct contracts or as part of 
contracts awarded to businesses which guarantee the use, as 
subcontractors, of economically disadvantaged small businesses 
owned and operated by socially and economically disadvantaged 
persons.  Any funds subject to this subdivision which are not 
awarded according to this subdivision shall be awarded to other 
small businesses and small businesses owned and operated by 
physically handicapped persons.  For purposes of this section, 
economically disadvantaged small business has the meaning 
defined in section 645.445, subdivision 5, except that a 
business is also eligible under clause (4) if it filed its first 
annual federal and state income tax returns within the preceding 
ten years. 
    Sec. 16.  Minnesota Statutes 1988, section 161.321, 
subdivision 6, is amended to read: 
    Subd. 6.  [RULES.] The commissioner may promulgate by rule, 
standards and procedures for certifying that small 
businesses, and economically disadvantaged small businesses 
owned and operated by physically handicapped persons and small 
businesses owned and operated by socially or economically 
disadvantaged persons are eligible to participate in the set 
aside program authorized in subdivision subdivisions 2 and 3.  
The commissioner may promulgate other rules as may be necessary 
to carry out the provisions of this section. 
    Sec. 17.  Minnesota Statutes 1988, section 161.3211, is 
amended to read: 
    161.3211 [REPORT BY COMMISSIONER OF TRANSPORTATION.] 
    The commissioner of transportation shall submit an annual 
report pursuant to section 3.195, to the governor and the 
legislature indicating the progress being made toward the 
objectives and goals of section 161.321 during the preceding 
fiscal year.  This report shall include the following 
information: 
    (a) The total dollar value and number of potential 
set-aside awards identified during this period and the 
percentage of total construction work this figure reflects; 
    (b) The number of small businesses identified and 
responding to the set-aside program, the total dollar value and 
number of set-aside contracts actually awarded to small 
businesses with an approximate designation as to the total 
number and value of set-aside contracts awarded to each small 
business, and the total number of small businesses that were 
awarded set-aside contracts; 
    (c) The total dollar value and number of set-aside 
contracts awarded to economically disadvantaged small businesses 
owned and operated by economically or socially disadvantaged 
persons with an approximate designation as to the total number 
and value of set-aside contracts awarded to each such small 
business, and the percentages of the total construction work the 
figures of the total dollar value and the number of set-asides 
contracts reflect; 
    (d) The number of contracts which were designated and 
set-aside pursuant to section 161.321, but which were not 
awarded to a small business, the estimated total dollar value of 
these awards, the lowest bid on each of these awards made by a 
small business and the price at which these contracts were 
awarded pursuant to the normal procedures. 
    Sec. 18.  Minnesota Statutes 1988, section 241.27, 
subdivision 2, is amended to read: 
    Subd. 2.  [REVOLVING FUND; USE OF FUND.] There is 
established in the department of corrections under the control 
of the commissioner of corrections the Minnesota correctional 
industries revolving fund to which shall be transferred the 
revolving funds authorized in Minnesota Statutes 1978, sections 
243.41, 243.85, clause (f), and any other industrial revolving 
funds heretofore established at any state correctional facility 
under the control of the commissioner of corrections.  The 
revolving fund established shall be used for the conduct of the 
industrial and commercial activities now or hereafter 
established at any state correctional facility, including but 
not limited to the purchase of equipment, raw materials, the 
payment of salaries, wages and other expenses necessary and 
incident thereto.  The purchase of materials and commodities for 
resale are not subject to the competitive bidding procedures of 
section 16B.07, but are subject to all other provisions of 
chapter 16B.  When practical, purchases must be made from 
socially and economically disadvantaged economically 
disadvantaged small businesses.  Additionally, the expenses of 
inmate vocational training and the inmate release fund may be 
financed from the correctional industries revolving fund in an 
amount to be determined by the commissioner.  The proceeds and 
income from all industrial and commercial activities conducted 
at state correctional facilities shall be deposited in the 
correctional industries revolving fund subject to disbursement 
as hereinabove provided.  The commissioner of corrections may 
request that money in the fund be invested pursuant to section 
11A.25; the proceeds from the investment not currently needed 
shall be accounted for separately and credited to the fund. 
    Sec. 19.  Minnesota Statutes 1988, section 471.345, 
subdivision 8, is amended to read: 
    Subd. 8.  [PROCUREMENT FROM SOCIALLY OR ECONOMICALLY 
DISADVANTAGED PERSONS.] For purposes of this subdivision, the 
following terms shall have the meanings herein ascribed to them: 
    (a) "socially and economically disadvantaged person"  means 
a person who has been deprived of the opportunity to develop and 
maintain a competitive position in the economy because of social 
or economic disadvantage.  This disadvantage may arise from 
cultural, social or economic circumstances or background, 
physical location if the person resides or is employed in an 
area declared as a labor surplus area by the United States 
department of commerce, physical handicap, or other similar 
cause "economically disadvantaged small business" has the 
meaning given it in section 645.445.  
    (b) "business entity" means an entity organized for profit, 
including an individual, partnership, corporation, joint 
venture, association, or cooperative.  
    Nothing in this section shall be construed to prohibit any 
municipality from adopting a resolution, rule, regulation or 
ordinance which on an annual basis designates and sets aside for 
awarding to business entities controlled by socially or 
economically disadvantaged persons economically disadvantaged 
small businesses a percentage of the value of its anticipated 
total procurement of goods and services, including construction, 
and which uses either a negotiated price or bid contract 
procedure in the awarding of a procurement contract under a 
set-aside program as allowed in this subdivision, provided that 
any award based on a negotiated price shall not exceed by more 
than five percent the municipality's estimated price for the 
goods and services if they were purchased on the open market and 
not under the set-aside program. 
    Sec. 20.  Minnesota Statutes 1988, section 473.142, is 
amended to read: 
    473.142 [SOCIALLY AND ECONOMICALLY DISADVANTAGED SMALL 
BUSINESSES.] 
    (a) The metropolitan council and agencies specified in 
section 473.143, subdivision 1, shall attempt to award at least 
nine percent of the value of all procurement, other than 
contracts under paragraph (c), to economically disadvantaged 
small businesses owned and operated by socially or economically 
disadvantaged persons.  For purposes of this section, "socially 
or economically disadvantaged person" means a person who has 
been deprived of the opportunity to develop and maintain a 
competitive position in the economy because of social or 
economic conditions.  This disadvantage may arise from cultural, 
social or economic circumstances, background, or other similar 
cause.  It includes racial minorities, women, persons with a 
disability as defined in section 363.01, subdivision 25, 
rehabilitation facilities, and work activity programs.  To the 
extent practicable, the council and agencies shall attempt to 
meet this goal through procurement from businesses with their 
principal place of business in Minnesota small business has the 
meaning defined in section 645.445, clauses (3) to (5).  In 
furtherance of this goal, the council or an agency shall set 
aside a percentage of all procurements for bidding only by these 
businesses.  The council or an agency may also shall award a 
five percent preference to these businesses economically 
disadvantaged small businesses, as defined in section 645.445, 
in the amount bid on selected procurements.  At least 75 percent 
of the value of the procurements awarded to economically 
disadvantaged small businesses must actually be performed by the 
business to which the award was made or another economically 
disadvantaged small business.  An economically disadvantaged 
small business that has been awarded more than three-tenths of 
one percent of the value of the total anticipated procurements 
for a fiscal year from the agency is disqualified from receiving 
further preference advantages for that fiscal year from that 
agency.  An economically disadvantaged small business is not 
eligible to participate in the bid preference established under 
this subdivision under conditions specified in section 16B.22, 
subdivision 1. 
    (b) The council and each agency specified in section 
473.143, subdivision 1, as a condition of awarding procurements 
for construction, consultant, professional, or technical service 
contracts in excess of $200,000, shall attempt to assure that at 
least ten percent a portion of the contract award to a prime 
contractor be subcontracted to a an economically disadvantaged 
small business owned and operated by a socially or economically 
disadvantaged person, or that at least ten percent a portion of 
the contract award be expended in purchasing materials or 
supplies from this type of an economically disadvantaged small 
business.  This paragraph does not apply if the council or 
agency determines that there is no business owned and operated 
by a socially or economically disadvantaged person able to 
perform the subcontract or provide the supplies, or if the prime 
contractor is a business owned and operated by a socially or 
economically disadvantaged person.  Subcontracting or purchasing 
of supplies under this subdivision is not included in 
determining achievement of goals under paragraph (a) or (c). 
    (c) The council and each agency specified in section 
473.143, subdivision 1, shall attempt to award at least six 
percent of the value of all procurements for consultant services 
or professional or technical services to economically 
disadvantaged small businesses owned and operated by socially or 
economically disadvantaged persons. 
    (d) In implementing paragraphs (a) and (c), the council and 
each agency specified in section 473.143, subdivision 1, shall 
attempt to purchase a variety of goods and services from 
different economically disadvantaged small businesses owned and 
operated by socially or economically disadvantaged persons. 
    (e) The council and each agency may adopt rules to 
implement this section. 
    (f) This section does not apply to procurement financed in 
whole or in part with federal funds if the procurement is 
subject to federal disadvantaged, minority, or women business 
enterprise regulations.  The council and each agency shall 
report annually to the legislature on compliance with this 
subdivision.  The reports must include the information specified 
in section 16B.21 that pertains to purchasing from economically 
disadvantaged small businesses owned by socially or economically 
disadvantaged persons. 
     Sec. 21.  Minnesota Statutes 1988, section 645.445, 
subdivision 5, is amended to read: 
    Subd. 5.  "Socially or Economically disadvantaged 
person business" means a person who business that is not an 
affiliate or subsidiary of a business dominant in its field of 
operation and that has been deprived of the opportunity to 
develop and maintain a competitive position in the economy 
because of social or economic conditions.  This disadvantage may 
arise from cultural, social or economic circumstances, or 
background, physical location A business is economically 
disadvantaged if: 
    (1) the person owner resides or is employed in a county in 
which the median income for married couples is less than 70 
percent of the state median income for married couples; or 
    (2) the owner resides or is employed in an area designated 
a labor surplus area by the United States Department of Labor, 
or other similar cause.  For purposes of this subdivision, an 
area designated a labor surplus area retains that status for 120 
days after certified small businesses in the area are notified 
of the termination of the designation by the United States 
Department of Labor.  It includes racial minorities, women, or 
persons who have suffered a substantial physical disability.; or 
    (3) the owner lacks adequate external support necessary to 
operate a competitive business enterprise as evidenced by 
diminished ability to secure long-term or working capital 
financing; equipment, raw material, or supplier trade credit; 
bonding and insurance, or if the business has not captured a 
proportionate share of the market for its goods or services; or 
    (4) the business filed its first annual federal and state 
income tax returns which reflected its operation as a business 
within the preceding five years or will file its first annual 
return which reflects its operation as a business within the 
next 12 months; or 
    (5) for purposes of sections 16B.19 to 16B.22 and 
137.31, the definition of "socially or economically 
disadvantaged person" includes the business is a 
rehabilitation facilities and facility or work activity programs 
program. 
    Sec. 22.  [STUDY OF SMALL BUSINESS PROGRAM.] 
    The commissioner of administration shall assist the 
commission created in section 1 in its study of small business 
procurement programs.  The commissioner shall review recent 
United States Supreme Court decisions to determine whether there 
is sufficient justification under a strict scrutiny standard to 
establish a narrowly tailored purchasing program for the benefit 
of any socially disadvantaged groups, and shall make 
recommendations to the commission regarding legislation and 
program operation where justification exists.  The commissioner 
shall make recommendations: 
    (1) for revising the definition of small business contained 
in Minnesota Statutes, section 645.445; and 
    (2) for alternative programs to stimulate growth 
opportunities for small businesses. 
The commissioner shall also assess the feasibility of 
establishing a preference program that incorporates urban and 
rural areas of high unemployment. 
     Sec. 23.  [RULES.] 
    The commissioner of administration may adopt emergency 
rules to implement sections 3 to 6.  For the purpose of 
certifying economically disadvantaged small businesses, the 
commissioner of administration may use, without further 
rulemaking, Minnesota Rules, Parts 1230.1400, 1230.1500, 
subparts 1, 2, 4-11, 1230.1600, 1230.1700, 1230.1900, subparts 1 
to 5.  The phrase "socially or economically disadvantaged" in 
those rules must be read to mean "economically disadvantaged" as 
defined in section 645.445, subdivision 5.  The phrase 
"set-aside program" in those rules must be read to mean the 
preference programs created in this act.  
     Sec. 24.  [APPROPRIATIONS.] 
    (a) The following amounts are appropriated from the general 
fund to the commissioner of administration for the purposes 
indicated. 
    (1) $125,000 in fiscal year 1990 for the study required in 
section 22. 
    (2) $85,000 in fiscal year 1990 and $105,000 in fiscal year 
1991 and two positions for the purposes of certifying small 
businesses and administering the provisions of this act. 
    (b) $75,000 is appropriated from the general fund to the 
legislative coordinating commission to administer section 1. 
    Sec. 25.  [REPEALER.] 
    (a) Minnesota Statutes 1988, section 137.31, subdivision 3, 
is repealed. 
    (b) Laws 1984, chapter 654, article 2, section 49, is 
repealed. 
    (c) Sections 1 and 22 are repealed on January 4, 1990. 
    (d) Minnesota Statutes 1988, section 473.406, is repealed.  
    (e) The amendments to Minnesota Statutes, made by sections 
2 to 21, are repealed June 30, 1990, and the revisor shall 
reinstate the stricken language and delete the new language in 
those sections. 
    (f) Notwithstanding Minnesota Statutes, section 645.36, 
section 25, paragraphs (a) and (d), are repealed June 30, 1990, 
and Minnesota Statutes 1988, sections 137.31, subdivision 3; and 
473.406, are revived on that date. 
    Sec. 26.  [EFFECTIVE DATE.] 
    Sections 1 to 25 are effective on the day following 
enactment and apply only to contracts for which notice of 
invitation to bid or requests for proposals are issued after 
that time. 
    Presented to the governor May 30, 1989 
    Signed by the governor June 2, 1989, 12:16 p.m.