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16C.16 DESIGNATION OF PROCUREMENTS FROM SMALL BUSINESSES.
    Subdivision 1. Small business procurements. (a) 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.
(b) The commissioner must solicit and encourage Minnesota small businesses to submit
responses or bids when the commissioner is entering into master contracts. If cost-effective, when
entering into a master contract, the commissioner must attempt to negotiate contract terms that
allow agencies the option of purchasing from small businesses, particularly small businesses that
are geographically proximate to the entity making the purchase.
(c) 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 awards, the commissioner may
designate a portion of the small business 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 process.
    Subd. 2. Small business. The commissioner shall adopt rules defining "small business" for
purposes of sections 16C.16 to 16C.21, 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.
    Subd. 3. Professional or technical procurements. Every state agency must for each fiscal
year designate for awarding to small businesses at least 25 percent of the value of anticipated
procurements of that agency for professional or technical services. The set-aside under this
subdivision is in addition to that provided by subdivision 1, but must otherwise comply with
section 16C.08.
    Subd. 4. Targeted group purchasing. The commissioner shall establish a program for
purchasing goods and services from targeted group businesses, as designated in subdivision 5.
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 ensure
that purchases from targeted group businesses reflect a fair and equitable representation of all
the state's purchasing.
    Subd. 5. Designation of targeted groups. (a) The commissioner of administration shall
periodically designate businesses that are majority owned and operated by women, persons
with a substantial physical disability, or specific minorities as targeted group businesses within
purchasing categories as determined by the commissioner. A group may 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
businesses owned by group members among all businesses in the state in the purchasing category.
(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 services 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. 6. 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
businesses or small targeted group businesses if the commissioner determines that at least three
small businesses or small targeted group businesses are likely to bid.
(c) The commissioner, as a condition of awarding a construction contract or approving a
contract for professional or technical services, may set goals that require the prime contractor
to subcontract a portion of the contract to small businesses or small targeted group businesses.
The commissioner must establish a procedure for granting waivers from the subcontracting
requirement when qualified small businesses or small targeted group businesses are not reasonably
available. The commissioner may establish financial incentives for prime contractors who exceed
the goals for use of small business or small targeted group business 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 businesses or
small targeted group businesses.
    Subd. 7. Economically disadvantaged areas. (a) Except as otherwise provided in paragraph
(b), the commissioner may award up to a six percent preference in the amount bid on state
procurement to small businesses located in an economically disadvantaged area.
(b) The commissioner may award up to a four percent preference in the amount bid on state
construction to small businesses located in an economically disadvantaged area.
(c) A business is located in an economically disadvantaged area if:
(1) the owner resides in or the business is located in a county in which the median income for
married couples is less than 70 percent of the state median income for married couples;
(2) the owner resides in or the business is located in an area designated a labor surplus area
by the United States Department of Labor; or
(3) the business is a certified rehabilitation facility or extended employment provider as
described in chapter 268A.
(d) 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.
(e) The Department of Revenue shall gather data necessary to make the determinations
required by paragraph (c), clause (1), and shall annually certify counties that qualify under
paragraph (c), 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. 8. Surety bonds. 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. 9. Determination of ability to perform. Before making an award under the
preference programs established in subdivisions 4 to 7, the commissioner shall evaluate whether
the small business or small targeted group 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. 10. Limits. At least 75 percent of the value of the subcontracts awarded to small
businesses or small targeted group businesses under subdivision 6, paragraph (c), must be
performed by the business to which the subcontract is awarded or by another small business or
small targeted group business.
    Subd. 11. 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 or small targeted group businesses. In the event of conflict with
other rules, section 16C.15 and rules adopted under it govern, if section 16C.15 applies. If it does
not apply, sections 16C.16 to 16C.21 and rules adopted under those sections govern.
    Subd. 12. Applicability. This section does not apply to construction contracts or contracts
for professional or technical services under section 16C.08 that are financed in whole or in part
with federal funds and that are subject to federal disadvantaged business enterprise regulations.
History: 1998 c 386 art 1 s 17; 1999 c 232 s 1; 1Sp2003 c 8 art 1 s 11; 2005 c 156 art 2 s 25