HF3881

Purpose

This bill aims to change how the Metropolitan Council and related agencies buy goods and construction services. It expands and tightens the use of preferences for certain small businesses, sets new subcontracting goals, requires reporting on how contracts are awarded, and removes an older requirement that businesses have a government-approved affirmative action plan to win large contracts.

Main provisions and what the bill seeks to accomplish

• Small business preferences and designations
  • The Metropolitan Council and specified agencies can give preferences to:
  • small targeted group businesses
  • veteran-owned small businesses
  • These preferences apply to both goods/services and construction work, using the percentages tied to other state procurement rules.
• Contract designations and competition
  • Contracts for construction, goods, or services can be designated to be awarded only to designated small businesses or veteran-owned small businesses if at least three qualified businesses are likely to respond to a solicitation.
• Subcontracting goals and waivers
  • When awarding contracts, prime contractors may be required to subcontract a portion of the work to designated small businesses, small targeted group businesses, or veteran-owned small businesses.
  • The council or agency must create a process to waive subcontracting requirements if qualified subcontractors aren’t reasonably available.
  • Financial incentives may reward contractors who exceed subcontracting goals; penalties may apply for not meeting goals.
  • Subcontracting goals have specific requirements:
  • At least 75% of the subcontract value for small targeted group businesses must go to the designated business or another small targeted group business.
  • At least 75% of the subcontract value for veteran-owned small businesses must go to the designated business or another veteran-owned small business.
• Direct solicitation and competitive process
  • The council and agencies may directly solicit bids from designated small businesses or veteran-owned small businesses up to a set total contract value, without going through the usual competitive bidding process.
• Rulemaking authority
  • The council and each agency may adopt rules to implement these provisions.
• Prompt payment and penalties
  • Prime contractors must pay subcontractors within 10 days after the prime contractor receives payment from the council or agency for undisputed services.
  • If payments are late, contractors owe interest (about 1.5% per month) on the late amount, with minimum penalties for larger unpaid balances.
  • Subcontractors prevailing in a civil action to collect interest can recover costs and attorney fees.
• Federal funds caveat
  • The new requirements do not apply to procurements funded wholly or partly with federal funds if federal regulations (disadvantaged minority or women business enterprise rules) apply.
• Reporting and accountability
  • The council must report to the commissioner of administration on compliance with these provisions.
  • By February 1 each year, the council must submit a legislative report detailing:
  • programs that work with small and small targeted group businesses
  • use of preferences, including how often preferences are used and how much was procured from small businesses and from small targeted group businesses
  • goals and efforts to use small businesses, small targeted group businesses, and veteran-owned small businesses in subcontracts
  • any financial incentives used or sanctions imposed
• Repeal of older compliance requirement
  • The bill repeals the existing requirement that contracts over $100,000 have to check for an affirmative action plan (certificate of compliance) and removes the related process and appendix.
  • This means the prior certificate-of-compliance system for large contracts is removed; instead, the new preferences and reporting framework takes its place.

Significant changes to existing law

• Repeal of 473.144 (certificates of compliance for contracts)
  • Eliminates the mandatory affirmative action plan certificate requirement for large contracts (over $100,000) and the associated process.
• Introduction and expansion of targeted preferences
  • Adds formal preferences and designation rules for small targeted group businesses and veteran-owned small businesses within metropolitan contracting.
• Structured subcontracting requirements
  • Introduces explicit subcontracting participation requirements and a process for waivers, with clear performance thresholds (e.g., 75% subcontract value rules for designated groups).
• Enhanced accountability and timing
  • Adds mandatory prompt payment obligations and a defined interest/penalty scheme for late payments.
  • Requires annual reporting to the legislature and ongoing compliance reporting to the commissioner of administration.

Potential impacts

• For designated groups
  • Increased opportunities for small targeted group businesses and veteran-owned small businesses to win contracts and participate in government projects.
• For prime contractors
  • New subcontracting obligations and potential incentives/penalties related to meeting subcontracting goals.
  • Possible shift in bidding strategies to include more small and veteran-owned partners.
• For Metropolitan Council operations
  • Changes how contracts are awarded, with more targeted designations and reporting requirements.
• For overall procurement
  • Reduced emphasis on the old certificate-of-compliance requirement and increased emphasis on targeted preferences, direct awarding options, and annual reporting.

Significance

• The bill prioritizes expanding participation of small, targeted, and veteran-owned businesses in metropolitan procurement.
• It introduces a more active role for reporting and accountability, while simplifying or removing a prior compliance certificate mechanism.
• It creates a mix of preferential designations, direct-award options, subcontracting expectations, and timely payment rules intended to improve inclusion and timely payments in public contracting.

Key terms to watch (definitions will align with bill language)

• Metropolitan Council; agencies specified in section 473.143
• small businesses
• small targeted group businesses
• veteran-owned small businesses
• preferences
• construction goods or services
• direct solicitation; competitive solicitation
• prime contractor; subcontractor
• subcontracting goals; waivers; good-faith efforts
• financial incentives; sanctions
• reporting to commissioner of administration
• annual legislative report
• rules/regulations (rulemaking)
• federal funds; federal DBE/MWBE regulations
• certificates of compliance; affirmative action plan (repealed)

Relevant Terms - Metropolitan Council - small businesses - small targeted group businesses - veteran-owned small businesses - preferences - construction goods or services - direct solicitation - competitive solicitation - prime contractor - subcontractor - subcontracting goals - waivers - good-faith efforts - annual reporting - commissioner of administration - rules - federal funds - certificates of compliance - affirmative action plan - 473.142 - 473.144