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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1990 

                        CHAPTER 541-H.F.No. 2230 
           An act relating to public purchasing; establishing 
          programs for purchasing from certain small targeted 
          group businesses and businesses located in 
          economically disadvantaged areas; requiring prompt 
          payment to subcontractors; providing penalties; 
          amending Minnesota Statutes 1988, sections 16B.07, by 
          adding a subdivision; 16B.20, subdivisions 1 and 3; 
          161.321, subdivisions 1, 4, 5, and by adding a 
          subdivision; Minnesota Statutes 1989 Supplement, 
          sections 16B.19; 16B.20, subdivision 2; 16B.21; 
          16B.22; 16B.226; 116J.68; 136.27; 136.72; 137.31, 
          subdivision 6; 161.321, subdivisions 2, 3, and 6; 
          161.3211; 241.27, subdivision 2; 471.345, subdivision 
          8; and 473.142; Laws 1989, chapter 352, section 25; 
          proposing coding for new law in Minnesota Statutes, 
          chapters 16A; 16B; and 137; repealing Minnesota 
          Statutes 1989 Supplement, sections 16B.189; 137.31, 
          subdivision 3a; and 645.445, subdivision 5.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [16A.1245] [PROMPT PAYMENT TO SUBCONTRACTORS.] 
    Each state agency contract must require the prime 
contractor to pay any subcontractor within ten days of the prime 
contractor's receipt of payment from the state for undisputed 
services provided by the subcontractor.  The contract must 
require the prime contractor to pay interest of 1-1/2 percent 
per month or any part of a month to the subcontractor on any 
undisputed amount not paid on time to the subcontractor.  The 
minimum monthly interest penalty payment for an unpaid balance 
of $100 or more is $10.  For an unpaid balance of less than 
$100, the prime contractor shall pay the actual penalty due to 
the subcontractor.  A subcontractor who prevails in a civil 
action to collect interest penalties from a prime contractor 
must be awarded its costs and disbursements, including 
attorney's fees, incurred in bringing the action. 
    Sec. 2.  Minnesota Statutes 1988, section 16B.07, is 
amended by adding a subdivision to read: 
    Subd. 6.  [NONCOMPETITIVE BIDS.] Agencies are encouraged to 
purchase from small targeted group businesses designated under 
section 16B.19 when making purchases that are not subject to 
competitive bidding procedures. 
    Sec. 3.  Minnesota Statutes 1989 Supplement, 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 red 
19:8designation 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.] The commissioner shall adopt 
rules defining "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 137.31, 137.35, 161.321, and 473.142.  The definition 
must include only businesses with their principal place of 
business in Minnesota.  The definition must establish different 
size standards for various types of businesses.  In establishing 
these standards, the commissioner must consider the differences 
among industries caused by the size of the market for goods or 
services and the relative size and market share of the 
competitors operating in those markets.  
    The definition of "small business" in section 645.445 
applies to sections 16B.189 to 16B.22, 137.31, 137.35, 161.321, 
and 473.142, until the commissioner adopts rules with a new 
definition.  However, only small businesses with a principal 
place of business in Minnesota are included for purposes of 
these sections. 
    Subd. 2.  [CONSULTANT, PROFESSIONAL AND TECHNICAL 
PROCUREMENTS.] Every state agency shall for each fiscal year 
designate for awarding to small businesses 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.
    Subd. 2a.  [TARGETED GROUP PURCHASING.] The commissioner 
shall establish a program for purchasing goods and services from 
targeted group businesses, as designated in subdivision 2b.  The 
purpose of the program is to remedy the effects of past 
discrimination against members of targeted groups.  In 
furtherance of this purpose, the commissioner shall attempt to 
assure that for each category of goods or services purchased by 
the state, the percentage of purchasing from each type of 
targeted group business is proportional to the representation of 
that targeted group business among all businesses in the state 
in the purchasing category. 
    Subd. 2b.  [DESIGNATION OF TARGETED GROUPS.] (a) The 
commissioner of administration shall periodically designate 
businesses that are majority owned and operated by women, 
persons with a disability, or specific minorities as targeted 
group businesses within purchasing categories the commissioner 
determines.  A group must be targeted within a purchasing 
category if the commissioner determines there is a statistical 
disparity between the percentage of purchasing from businesses 
owned by group members and the representation of business owned 
by group members among all business in the state in the 
purchasing category.  The commissioner must review public 
agencies' purchasing from businesses owned by women, persons 
with a disability, and minorities at least once every two 
years.  The commissioner must review the representation of 
businesses owned by these groups among all businesses in the 
state at least once every five years. 
    (b) In addition to designations under paragraph (a), an 
individual business may be included as a targeted group business 
if the commissioner determines that inclusion is necessary to 
remedy discrimination against the owner based on race, gender, 
or disability in attempting to operate a business that would 
provide goods or service to public agencies. 
    (c) The designations of purchasing categories and 
businesses under paragraphs (a) and (b) are not rules for 
purposes of chapter 14, and are not subject to rulemaking 
procedures of that chapter. 
    Subd. 2c.  [PURCHASING METHODS.] (a) The commissioner may 
award up to a six percent preference in the amount bid for 
specified goods or services to small targeted group businesses. 
    (b) The commissioner may designate a purchase of goods or 
services for award only to small targeted group businesses, if 
the commission determines that at least three small targeted 
group businesses are likely to bid. 
    (c)  The commissioner, as a condition of awarding a 
construction contract or approving a contract for consultant, 
professional, or technical services, may set goals that require 
the prime contractor to subcontract a portion of the contract to 
small targeted group businesses.  The commissioner must 
establish a procedure for granting waivers from the 
subcontracting requirement when qualified small targeted group 
businesses are not reasonably available.  The commissioner may 
establish financial incentives for prime contractors who exceed 
the goals for use of subcontractors and financial penalties for 
prime contractors who fail to meet goals under this paragraph.  
The subcontracting requirements of this paragraph do not apply 
to prime contractors who are small targeted group businesses. 
    Subd. 2d.  [ECONOMICALLY DISADVANTAGED AREAS.] The 
commissioner may award up to a four percent preference in the 
amount bid on state procurement to small businesses located in 
an economically disadvantaged area.  A business is located in an 
economically disadvantaged area if: 
    (1) the 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 
    (3) the business is a rehabilitation facility or work 
activity program. 
    The commissioner may designate one or more areas designated 
as targeted neighborhoods under section 469.202 or as enterprise 
zones under section 469.167 as economically disadvantaged areas 
for purposes of this subdivision if the commissioner determines 
that this designation would further the purposes of this 
section.  If the owner of a small business resides or is 
employed in a designated area, the small business is eligible 
for any preference provided under this subdivision. 
    The department of revenue shall gather data necessary to 
make the determinations required by clause (1), and shall 
annually certify counties that qualify under clause (1).  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. 
    Subd. 3.  [NEGOTIATED PRICE OR BID CONTRACT SURETY 
BONDS.] 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 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 preference programs established in 
subdivision 5 for economically disadvantaged small businesses 
subdivisions 2a to 2d, 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 LIMITS.] The 
commissioner shall award a five percent preference in the amount 
bid on all state procurements to economically disadvantaged 
small businesses to encourage the participation of economically 
disadvantaged small businesses in state procurement.  At least 
75 percent of the value of the procurements subcontracts awarded 
to economically disadvantaged small targeted group businesses 
under subdivision 2c, paragraph (c) must actually be performed 
by the business to which the award subcontract is made awarded 
or by another economically disadvantaged small targeted group 
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 
preference advantages for that fiscal year.  
    Subd. 6.  [CONTRACTS IN EXCESS OF $200,000; SUBCONTRACTS.] 
The commissioner, as a condition of awarding state procurements 
for construction contracts or approving contracts for 
consultant, professional, or technical services under section 
16B.17 in excess of $200,000, 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 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 economically disadvantaged 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 
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, as 
certified under section 16B.22. 
    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 under section 16B.17 that 
are financed in whole or in part with federal funds and that are 
subject to federal disadvantaged business enterprise regulations.
    Sec. 4.  Minnesota Statutes 1988, section 16B.20, 
subdivision 1, is amended to read: 
    Subdivision 1.  [COMMISSIONER OF ADMINISTRATION.] The 
commissioners of administration and trade and economic 
development shall publicize the provisions of the set-aside 
program purchasing programs in sections 16B.19 to 16B.22, 
attempt to locate small businesses able to perform set-aside 
procurement awards under the programs, and encourage 
participation.  When the commissioner of administration 
determines that a small business is unable to perform under 
a set-aside contract program established in sections 16B.19 to 
16B.22, the commissioner shall inform the commissioner of trade 
and economic development who shall assist the small business in 
attempting to remedy the causes of the inability to perform a 
set-aside award.  In assisting the small business, the 
commissioner of trade and economic development in cooperation 
with the commissioner of administration shall use management or 
financial assistance programs made available by or through the 
department of trade and economic development, other state or 
governmental agencies, or private sources.  
    Sec. 5.  Minnesota Statutes 1989 Supplement, section 
16B.20, subdivision 2, is amended to read: 
    Subd. 2.  [ADVISORY COUNCIL.] A small business and targeted 
group 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. 
    Sec. 6.  Minnesota Statutes 1988, section 16B.20, 
subdivision 3, is amended to read: 
    Subd. 3.  [DUTIES.] The small business procurement advisory 
council shall:  
    (1) advise the commissioner of administration on matters 
relating to the small business and targeted group procurement 
program; 
    (2) review complaints or grievances from small business and 
targeted group vendors or contractors who are doing or 
attempting to do business under the program; and 
    (3) review the reports of the commissioners of 
administration and trade and economic development provided by 
section 16B.21 to ensure compliance with the goals of the 
program.  
    Sec. 7.  Minnesota Statutes 1989 Supplement, 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, 137.31, 137.35, 161.321, and 473.142 during 
the preceding fiscal year.  The commissioner shall also submit a 
quarterly report to the small business and targeted group 
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 small business procurement program, the total 
dollar value and number of set-aside and other contracts 
actually awarded to small businesses, 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 targeted group businesses 
pursuant to each bidding process authorized by section sections 
16B.19, subdivision 5 2c, 137.31, 137.35, 161.321, and 473.142; 
the total number and value of these contracts awarded to each 
economically disadvantaged small targeted group business and to 
each category type of economically disadvantaged small targeted 
group business in each purchasing category, and the percentages 
of the total state procurements procurement for each purchasing 
category the figures represent. 
    (4) the total dollar value and number of contracts awarded 
to small businesses in economically disadvantaged areas under 
the bidding process authorized in section 16B.19, subdivision 
2d; the total number and value of these contracts awarded to 
each business, and to all business within each economically 
disadvantaged area in each purchasing category, and the 
percentages of total procurement for each purchasing category 
the figures represent. 
    The information required by clauses (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 small business and small targeted group business procurement 
program during the preceding fiscal year; 
    (2) the efforts undertaken to identify economically 
disadvantaged small targeted group businesses and the efforts 
undertaken to encourage participation in the set-aside bid 
preference targeted group purchasing program; 
    (3) the efforts undertaken by the commissioner to remedy 
the inability of small businesses and targeted group businesses 
to perform on potential set-aside or other contract awards; and 
    (4) the commissioner's recommendations for strengthening 
the small business and economically disadvantaged small targeted 
group business procurement program and delivery of services to 
small businesses. 
     Subd. 3.  [REPORTS FROM OTHER AGENCIES.] The commissioner 
of transportation, each metropolitan agency listed in section 
473.143, subdivision 1, and the University of Minnesota shall 
report to the commissioner of administration all information 
that the commissioner requests to make reports required under 
this section.  The information must be reported at the time and 
in the manner requested by the commissioner of administration. 
    Sec. 8.  Minnesota Statutes 1989 Supplement, section 
16B.22, is amended to read: 
    16B.22 [ELIGIBILITY; RULES.] 
    Subdivision 1.  [ELIGIBILITY.] A small business certified 
as economically disadvantaged under section 645.445, subdivision 
5, clause (1) or (2), 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 award under this 
program and after that period is not eligible to participate for 
another five years.  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) A small business wishing to 
participate in the programs under section 16B.19, subdivisions 
2a to 2d, must be certified by the commissioner.  The 
commissioner shall adopt by rule additional standards and 
procedures for certifying that small businesses and economically 
disadvantaged, small targeted group businesses, and small 
businesses located in economically disadvantaged areas 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. 
     (c) The commissioner may make rules that set time limits 
and other eligibility limits on business participation in 
programs under sections 16B.19 to 16B.22. 
    Sec. 9.  Minnesota Statutes 1989 Supplement, section 
16B.226, is amended to read: 
    16B.226 [CERTIFICATION.] 
    A business that is certified by the commissioner of 
administration as a small business or an economically 
disadvantaged, small targeted group business or a business 
located in an economically disadvantaged area 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) as a small targeted group 
business, 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. 10.  [16B.227] [CRIMINAL PENALTY.] 
    A person who knowingly provides false information to a 
public official or employee for the purpose of obtaining or 
retaining certification as a small targeted group business or a 
small business located in an economically disadvantaged area 
under sections 16B.189 to 16B.226, 137.31, 137.35, 161.321, or 
473.142, is guilty of a misdemeanor. 
    Sec. 11.  Minnesota Statutes 1989 Supplement, section 
116J.68, is amended to read: 
    116J.68 [BUREAU OF SMALL BUSINESS.] 
    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 economically disadvantaged small targeted group 
businesses and small businesses located in an economically 
disadvantaged area. 
    Subd. 2.  The bureau shall:  
    (a) provide information and assistance with respect to all 
aspects of business planning and business management related to 
the start-up, operation, or expansion of a small business in 
Minnesota; 
    (b) refer persons interested in the start-up, operation, or 
expansion of a small business in Minnesota to assistance 
programs sponsored by federal agencies, state agencies, 
educational institutions, chambers of commerce, civic 
organizations, community development groups, private industry 
associations, and other organizations or to the business 
assistance referral system established by the Minnesota Project 
Outreach Corporation; 
    (c) plan, develop, and implement a master file of 
information on small business assistance programs of federal, 
state, and local governments, and other public and private 
organizations so as to provide comprehensive, timely information 
to the bureau's clients; 
    (d) employ staff with adequate and appropriate skills and 
education and training for the delivery of information and 
assistance; 
    (e) seek out and utilize, to the extent practicable, 
contributed expertise and services of federal, state, and local 
governments, educational institutions, and other public and 
private organizations; 
    (f) maintain a close and continued relationship with the 
director of the procurement program within the department of 
administration so as to facilitate the department's duties and 
responsibilities under sections 16B.19 to 16B.22 relating to the 
small targeted group business set aside and economically 
disadvantaged business program of the state; 
    (g) develop an information system which will enable the 
commissioner and other state agencies to efficiently store, 
retrieve, analyze, and exchange data regarding small business 
development and growth in the state.  All executive branch 
agencies of state government and the secretary of state shall to 
the extent practicable, assist the bureau in the development and 
implementation of the information system; 
    (h) establish and maintain a toll free telephone number so 
that all small business persons anywhere in the state can call 
the bureau office for assistance.  An outreach program shall be 
established to make the existence of the bureau well known to 
its potential clientele throughout the state.  If the small 
business person requires a referral to another provider the 
bureau may use the business assistance referral system 
established by the Minnesota Project Outreach Corporation; 
     (i) conduct research and provide data as required by state 
legislature; 
     (j) develop and publish material on all aspects of the 
start-up, operation, or expansion of a small business in 
Minnesota; 
     (k) collect and disseminate information on state 
procurement opportunities, including information on the 
procurement process; 
     (l) develop a public awareness program through the use of 
newsletters, personal contacts, and electronic and print news 
media advertising about state assistance programs for small 
businesses, including those programs specifically for socially 
disadvantaged small business persons; 
     (m) publicize to small businesses section 14.115 which 
requires consideration of small business issues in state agency 
rulemaking; 
     (n) enter into agreements with the federal government and 
other public and private entities to serve as the statewide 
coordinator or host agency for the federal small business 
development center program under United States Code, title 15, 
section 648; 
     (o) establish an evaluation mechanism to determine if 
assistance providers have adequate expertise and resources to 
deliver quality services.  Evaluation of assistance providers 
may be based on the ability of the provider to offer the 
advertised service, the training and experience of the provider, 
and the formal evaluation process used by the provider.  The 
evaluation mechanism must be designed so that the business 
assistance referral system established by the Minnesota Project 
Outreach Corporation may use the results of the evaluation in 
providing clients with referrals to providers; and 
     (p) assist providers in the evaluation of their programs 
and the assessment of their service area needs.  The bureau may 
establish model evaluation techniques and performance standards 
for providers to use. 
    Sec. 12.  Minnesota Statutes 1989 Supplement, 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 economically disadvantaged, 
small targeted group businesses, and businesses in economically 
disadvantaged areas designated under section 16B.19.  
    Sec. 13.  Minnesota Statutes 1989 Supplement, 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 economically disadvantaged, small targeted group 
businesses, and businesses in economically disadvantaged areas 
designated under section 16B.19. 
    Sec. 14.  Minnesota Statutes 1989 Supplement, 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; and 
    (c) the total dollar value and number of procurement 
contracts awarded to economically disadvantaged small businesses 
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. 15.  [137.35] [TARGETED BUSINESSES.] 
    Subdivision 1.  [PURCHASING METHODS.] (a) The regents may 
award up to a six percent preference in the amount bid for 
specified goods and services to small targeted group businesses 
designated under section 16B.19. 
    (b) The regents may designate a purchase of goods or 
services for award only to small targeted group businesses 
designated under section 16B.19 if the regents determine that at 
least three small targeted group businesses are likely to bid. 
    (c) The regents, as a condition of awarding a construction 
contract or approving a contract for consultant, professional, 
or technical services, may set goals that require the prime 
contractor to subcontract a portion of the contract to small 
targeted group businesses.  The regents must establish a 
procedure for granting waivers from the subcontracting 
requirement when qualified small targeted group businesses are 
not reasonably available.  The regents may establish financial 
incentives for prime contractors who exceed the goals for use of 
subcontractors and financial penalties for prime contractors who 
fail to meet goals under this paragraph. The subcontracting 
requirements of this paragraph do not apply to prime contractors 
who are small targeted group businesses.  At least 75 percent of 
the value of the subcontracts awarded to small targeted group 
businesses under this paragraph must be performed by the 
business to which the subcontract is awarded or by another small 
targeted group business. 
    (d) The regents may award up to a four percent preference 
in the amount bid on university procurement to small businesses 
located in an economically disadvantaged area as defined in 
section 16B.19. 
    (e) The regents may delegate responsibility under this 
section to university employees. 
    Subd. 2.  [ELIGIBILITY.] The rules adopted by the 
commissioner of administration to define small businesses and to 
set time and other eligibility requirements for participation in 
programs under sections 16B.19 to 16B.22 apply to this section. 
    Subd. 3.  [NONCOMPETITIVE BIDS.] The regents are encouraged 
to purchase from small targeted group businesses designated 
under section 16B.19 when making purchases that are not subject 
to competitive bidding procedures. 
    Subd. 4.  [REPORT.] The regents must report to the 
commissioner of administration on compliance with this section.  
The information must be reported at the time and in the manner 
requested by the commissioner. 
    Sec. 16.  [137.36] [PROMPT PAYMENT TO SUBCONTRACTORS.] 
    Each university contract must require the prime contractor 
to pay any subcontractor within ten days of the prime 
contractor's receipt of payment from the university for 
undisputed services provided by the subcontractor.  The contract 
must require the prime contractor to pay interest of 1-1/2 
percent per month or any part of a month to the subcontractor on 
any undisputed amount not paid on time to the subcontractor.  
The minimum monthly interest penalty payment for an unpaid 
balance of $100 or more is $10.  For an unpaid balance of less 
than $100, the prime contractor shall pay the actual penalty due 
to the subcontractor.  A subcontractor who prevails in a civil 
action to collect interest penalties from a prime contractor 
must be awarded its costs and disbursements, including attorney 
fees, incurred in bringing the action. 
    Sec. 17.  Minnesota Statutes 1988, section 161.321, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEFINITIONS.] For purposes of this section 
the following terms have the meanings given them, except where 
the context clearly indicates a different meaning is intended. 
     (a) "Award" means the granting of a contract in accordance 
with all applicable laws and rules governing competitive bidding 
except as otherwise provided in this section. 
     (b) "Contract" means an agreement entered into between a 
business entity and the state of Minnesota for the construction 
of transportation improvements. 
     (c) "Subcontractor" means a business entity which enters 
into a legally binding agreement with another business entity 
which is a party to a contract as defined in clause (b). 
     (d) "targeted group business" means a business designated 
under section 16B.19, subdivision 2b. 
    Sec. 18.  Minnesota Statutes 1989 Supplement, 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 five percent 
of the construction work to be performed by contract for award 
to small businesses or economically disadvantaged small 
businesses or for award to businesses which guarantee use of 
small businesses or economically disadvantaged small businesses 
as subcontractors.  (a) The commissioner may award up to a six 
percent preference in the amount bid for specified construction 
work to small targeted group businesses. 
    (b) The commissioner may designate a contract for 
construction work for award only to small targeted group 
businesses if the commissioner determines that at least three 
small targeted group businesses are likely to bid. 
    (c) The commissioner, as a condition of awarding a 
construction contract, may set goals that require the prime 
contractor to subcontract a portion of the contract to small 
targeted group businesses.  The commissioner must establish a 
procedure for granting waivers from the subcontracting 
requirement when qualified small targeted group businesses are 
not reasonably available.  The commissioner may establish 
financial incentives for prime contractors who exceed the goals 
for use of subcontractors and financial penalties for prime 
contractors who fail to meet goals under this paragraph.  The 
subcontracting requirements of this paragraph do not apply to 
prime contractors who are small targeted group businesses. 
    (d) The commissioner may award up to a four percent 
preference in the amount bid on procurement to small businesses 
located in an economically disadvantaged area as defined in 
section 16B.19.  
    Sec. 19.  Minnesota Statutes 1989 Supplement, section 
161.321, subdivision 3, is amended to read: 
    Subd. 3.  [AWARDS TO SMALL BUSINESSES.] At least 75 percent 
of the amount so set aside must be subcontracts awarded, if 
possible, either to economically disadvantaged small targeted 
group businesses as direct contracts or as part of contracts 
awarded to businesses which guarantee the use, as 
subcontractors, of economically disadvantaged small businesses.  
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 must be performed by the business 
to which the subcontract is awarded or another small targeted 
group business. 
    Sec. 20.  Minnesota Statutes 1988, section 161.321, 
subdivision 4, is amended to read: 
    Subd. 4.  [AWARDS, LIMITATIONS.] The amount of any 
individual contract or subcontract awarded pursuant to 
subdivisions 2 and 3 shall not exceed $200,000, nor shall any 
one small business be awarded an aggregate amount of contracts 
or subcontracts or both in excess of $200,000 in any one fiscal 
year.  Contracts awarded pursuant to this section shall be are 
subject to all applicable limitations contained in section 
16B.19, subdivisions 2, 3, and 6 rules adopted by the 
commissioner of administration. 
    Sec. 21.  Minnesota Statutes 1988, section 161.321, 
subdivision 5, is amended to read: 
    Subd. 5.  [RECOURSE TO OTHER BUSINESSES.] In the event that 
If the commissioner is unable to award a contract pursuant to 
the provisions of subdivisions 2 and 3, the award may be placed 
pursuant to the normal solicitation and award provisions set 
forth in this chapter and chapter 16 16B. 
    Sec. 22.  Minnesota Statutes 1989 Supplement, 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 are eligible to 
participate in the set-aside program authorized in subdivisions 
2 and 3.  The rules adopted by the commissioner of 
administration to define small businesses and to set time and 
other eligibility requirements for participation in programs 
under sections 16B.19 to 16B.22 apply to this section.  The 
commissioner may promulgate other rules as may be necessary to 
carry out the provisions of this section. 
    Sec. 23.  Minnesota Statutes 1988, section 161.321, is 
amended by adding a subdivision to read: 
    Subd. 7.  [NONCOMPETITIVE BIDS.] The commissioner is 
encouraged to purchase from small targeted group businesses 
designated under section 16B.19 when making purchases that are 
not subject to competitive bidding procedures. 
    Sec. 24.  Minnesota Statutes 1989 Supplement, 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 
with an approximate designation as to the total number and value 
of 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 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 report to the commissioner of 
administration on compliance with this section.  The information 
must be reported at the time and in the manner requested by the 
commissioner. 
    Sec. 25.  Minnesota Statutes 1989 Supplement, 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 
economically disadvantaged small targeted group businesses 
designated under section 16B.19.  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. 26.  Minnesota Statutes 1989 Supplement, section 
471.345, subdivision 8, is amended to read: 
    Subd. 8.  [PROCUREMENT FROM ECONOMICALLY DISADVANTAGED 
PERSONS.] For purposes of this subdivision, the following terms 
shall have the meanings herein ascribed to them: 
    (a) "Economically disadvantaged Small targeted group 
business" has the meaning given it in means businesses 
designated under section 645.445 16B.19.  
    (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 economically disadvantaged small targeted group 
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. 27.  Minnesota Statutes 1989 Supplement, section 
473.142, is amended to read: 
    473.142 [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.  For purposes of this section, economically 
disadvantaged 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 shall award a five percent preference to 
economically disadvantaged small businesses, as defined in 
section 645.445, in the amount bid on 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 a 
portion of the contract award to a prime contractor be 
subcontracted to an economically disadvantaged small business, 
or that a portion of the contract award be expended in 
purchasing materials or supplies from an economically 
disadvantaged small business.  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. 
    (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 may award 
up to a six percent preference in the amount bid for specified 
goods or services to small targeted group businesses designated 
under section 16B.19. 
    (b) The council and each agency specified in section 
473.143, subdivision 1, may designate a purchase of goods or 
services for award only to small targeted group businesses 
designated under section 16B.19 if the council or agency 
determines that at least three small targeted group businesses 
are likely to bid. 
    (c) The council and each agency specified in section 
473.143, subdivision 1, as a condition of awarding a 
construction contract or approving a contract for consultant, 
professional, or technical services, may set goals that require 
the prime contractor to subcontract a portion of the contract to 
small targeted group businesses designated under section 16B.19. 
The council or agency must establish a procedure for granting 
waivers from the subcontracting requirement when qualified small 
targeted group businesses are not reasonably available.  The 
council or agency may establish financial incentives for prime 
contractors who exceed the goals for use of subcontractors and 
financial penalties for prime contractors who fail to meet goals 
under this paragraph.  The subcontracting requirements of this 
paragraph do not apply to prime contractors who are small 
targeted group businesses.  At least 75 percent of the value of 
the subcontracts awarded to small targeted group businesses 
under this paragraph must be performed by the business to which 
the subcontract is awarded or by another small targeted group 
business. 
    (d) The council and each agency listed in section 473.143, 
subdivision 1, are encouraged to purchase from small targeted 
group businesses designated under section 16B.19 when making 
purchases that are not subject to competitive bidding procedures.
    (e) The council and each agency may adopt rules to 
implement this section. 
    (f) Each council or agency contract must require the prime 
contractor to pay any subcontractor within ten days of the prime 
contractor's receipt of payment from the council or agency for 
undisputed services provided by the subcontractor.  The contract 
must require the prime contractor to pay interest of 1-1/2 
percent per month or any part of a month to the subcontractor on 
any undisputed amount not paid on time to the subcontractor.  
The minimum monthly interest penalty payment for an unpaid 
balance of $100 or more is $10.  For an unpaid balance of less 
than $100, the prime contractor shall pay the actual penalty due 
to the subcontractor.  A subcontractor who prevails in a civil 
action to collect interest penalties from a prime contractor 
must be awarded its costs and disbursements, including attorney 
fees, incurred in bringing the action. 
    (g) 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 commissioner of 
administration on compliance with this subdivision section.  The 
reports must include the information specified in section 16B.21 
that pertains to purchasing from economically disadvantaged 
small businesses must be reported at the time and in the manner 
requested by the commissioner. 
    Sec. 28.  [STUDIES.] 
    (a) The commissioner of trade and economic development 
shall evaluate the effectiveness of programs to provide working 
capital to small businesses and the need for additional programs.
    (b) The commissioner of administration shall review current 
practice and study the extent to which public agencies need to 
reserve retainage from progress payments on public contracts.  
    (c) The commissioner of administration shall review current 
practices and study the extent to which public agencies need to 
require security bonds on public contracts. 
    (d) The reviews and evaluations in this section must be 
done by January 15, 1991. 
    Sec. 29.  Laws 1989, chapter 352, section 25, is amended to 
read:  
    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. 30.  [RULES.] 
    The commissioner of administration may adopt emergency 
rules for purposes of implementing sections 3 to 9.  For 
purposes of certifying small targeted group businesses and small 
businesses located in economically disadvantaged areas, the 
commissioner of administration may use, without further 
rulemaking, previous rules used to implement the program 
governing socially or economically disadvantaged businesses.  If 
the commissioner uses those rules, the phrase "socially or 
economically disadvantaged business" in those rules must be read 
to refer to targeted group businesses and businesses located in 
economically disadvantaged areas.  The phrase "set-aside" 
program in those rules must be read to refer to the programs 
created in section 3. 
    Sec. 31.  [REPEALER.] 
    Minnesota Statutes 1989 Supplement, sections 16B.189; 
137.31, subdivision 3a; and 645.445, subdivision 5, are repealed.
    Sec. 32.  [EFFECTIVE DATE.] 
    Sections 1 to 28 and 31 are effective July 1, 1990, and 
apply only to contracts for which notice of invitation to bid or 
requests for proposals are issued after that date.  Sections 29 
and 30 are effective the day following final enactment.  The 
rulemaking authority granted to the commissioner of 
administration in section 8, paragraph (c), is effective the day 
following final enactment. 
    Presented to the governor April 26, 1990 
    Signed by the governor May 3, 1990, 5:55 p.m.