SF4201 (Legislative Session 94 (2025-2026))
Small business contracting requirements and requiring report to the legislature of compliance modification
Related bill: HF3881
AI Generated Summary
Purpose
To modify how the Metropolitan Council and its agencies award contracts, with a focus on increasing opportunities for small targeted group businesses and veteran-owned small businesses. The bill expands and formalizes preferences, creates contract designations that limit competition to designated groups in certain cases, strengthens subcontracting requirements, allows direct awards under specific conditions, and requires annual reporting on program results. It also repeals a previous requirement related to affirmative action certificates for large contracts.
Main provisions
Preferences for small businesses
- The Metropolitan Council and designated agencies can award preferences for specified goods, services, and construction work to:
- small targeted group businesses
- veteran-owned small businesses
- The size of these preferences follows percentages in existing statutes (as referenced by sections 16C.16 and 161.321).
Contract designations
- For construction goods or services, contracts may be designated so only small businesses, small targeted group businesses, or veteran-owned small businesses designated under 16C.16 are eligible to respond, but only if at least three such firms are likely to bid.
- Separate designation rules apply specifically to veteran-owned small businesses if at least three are likely to respond.
Subcontracting requirements
- When awarding or approving contracts, the council or agencies may require prime contractors to subcontract portions to small businesses, small targeted group businesses, and/or veteran-owned small businesses.
- To the extent subcontracting occurs, at least:
- 75% of the subcontract value awarded to small targeted group businesses must be performed by the designated business or another small targeted group business; and
- 75% of the subcontract value awarded to veteran-owned small businesses must be performed by the designated business or another veteran-owned small business.
- Waivers can be issued if qualified small businesses aren’t reasonably available.
- Prime contractors that are themselves small businesses (or veteran-owned/small targeted group businesses) are exempt from these subcontracting requirements.
- Direct solicitation of certain contracts to designated small businesses is allowed up to a set total value without a competitive bidding process.
Direct solicitation and rulemaking
- The councils/agencies may award a contract directly to designated small businesses or veteran-owned small businesses up to a total contract value allowed by law, avoiding competitive solicitations where appropriate.
- The councils/agencies may adopt rules to implement these provisions.
Payment and penalties
- Prime contractors must pay subcontractors within ten days of the prime’s receipt of payment for undisputed services.
- Interest of 1.5% per month (or part thereof) must be paid on any undisputed late amount.
- If the balance is $100 or more and late, the minimum monthly interest payment is $10; for smaller balances, the actual penalty applies.
- Subcontractors prevailing in a civil action to collect interest penalties can recover costs and attorney fees.
Compliance, reporting, and oversight
- The council and agencies must report to the commissioner of administration on compliance with these provisions.
- By February 1 each year, the council must submit a legislative report covering:
- programs that work with small and small targeted group businesses
- use and frequency of preferences for contracting (including amounts procured from and contracts awarded to small targeted group businesses and small businesses)
- goals and good-faith efforts in subcontracts for small targeted group and veteran-owned businesses
- any financial incentives used or sanctions imposed
Applicability to federal funds
- The new provisions do not apply to procurements funded entirely or partially with federal funds if the procurement is subject to federal disadvantaged minority or women business enterprise regulations.
Changes to existing law
Repeal of Certificates of Compliance for Contracts (473.144)
- The bill repeals the former requirement that contracts above $100,000 with certain employers require an affirmative action plan approved by the Minnesota Commissioner of Human Rights and a certificate of compliance.
- It also repeals related Appendix language describing the old certificate process and the conditions under which a contract could not be executed without the certificate.
Administrative reporting and appendix alignment
- The bill requires an updated framework for reporting and compliance rather than the former affirmative-action-certification pathway.
Notable implications for contractors and public purchasing
- Expanded eligibility and opportunities for small targeted group and veteran-owned small businesses through preferences and designations.
- Increased focus on subcontracting with targeted groups, including required shares of subcontract value and possible waivers if qualified firms aren’t available.
- Potential for direct awards in certain circumstances, reducing the need for competitive bidding.
- Stronger oversight and annual performance reporting to lawmakers.
- Elimination of the old affirmative action certificate requirement for large contracts, shifting to a new compliance and reporting regime.
Summary of significant changes
- Adds targeted preferences and contract designations favoring small targeted group and veteran-owned small businesses.
- Introduces firm subcontracting standards (with 75% thresholds) and associated waivers, incentives, and penalties.
- Allows direct award under specified thresholds to designated firms without competitive bidding.
- Repeals the prior Certificates of Compliance for Contracts program and its related affirmative action certificate requirements.
- Establishes annual reporting to the legislature and ongoing compliance reporting to the commissioner of administration.
- Maintains federal fund protections by excluding certain procurements from these provisions when federal DBE/WBE rules apply.
Relevant terms - Metropolitan Council - small businesses - small targeted group businesses - veteran-owned small businesses - preferences - designations - construction contracts - goods or services - subcontracting - goals - good-faith efforts - waivers - financial incentives - penalties - prompt payment - interest - direct solicitation - competitive solicitation - rulemaking - commissioner of administration - annual legislative report - compliance reporting - federal funds - disadvantaged minority and women business enterprise (DBE/WBE) - affirmative action plan - certificate of compliance - commissioner of human rights - extension options - bids and proposals
Bill text versions
- Introduction PDF PDF file
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| March 09, 2026 | Senate | Action | Introduction and first reading | ||
| March 09, 2026 | Senate | Action | Referred to | State and Local Government |
Citations
[
{
"analysis": {
"added": [
"Adds a preferential award for specified goods or services up to the percentage under 16C.16 Subd.6(a) for small targeted group businesses and veteran-owned small businesses designated under 16C.16.",
"Adds a construction-related preference up to the percentage under 161.321 Subd.2(a) in the amount bid for specified construction work for small targeted group businesses and veteran-owned small businesses designated under 16C.16."
],
"removed": [],
"summary": "Amends Minnesota Statutes 473.142 to authorize preferences for small targeted group businesses and veteran-owned small businesses for specified goods or services, and similarly for specified construction work, with percentages tied to other statutory provisions.",
"modified": [
"Reframes and expands the existing small-business preference framework within 473.142, including cross-references to 16C.16 and 161.321."
]
},
"citation": "473.142",
"subdivision": "Subd.1"
},
{
"analysis": {
"added": [
"Allows designation of a contract to be awarded only to small businesses or small targeted group businesses designated under 16C.16 if at least three small businesses or small targeted group businesses are likely to respond.",
"Allows designation of a contract for construction, goods, or services for award only to veteran-owned small businesses designated under 16C.16 if at least three veteran-owned small businesses are likely to respond."
],
"removed": [],
"summary": "Designates contracts for construction, goods, or services to be awarded only to small businesses or to small targeted group/veteran-owned small businesses under specified conditions.",
"modified": [
"Creates certification-like criteria for designation responses and response thresholds to justify non-competitive designation."
]
},
"citation": "473.142",
"subdivision": "Subd.2"
},
{
"analysis": {
"added": [
"Sets contracting-goal requirements that prime contractors must subcontract portions of the contract to small businesses, small targeted group businesses, and veteran-owned small businesses designated under 16C.16.",
"Authorizes waivers if qualified small businesses or veteran-owned/targeted groups are not reasonably available, and permits financial incentives for exceeding goals and penalties for failing to meet goals."
],
"removed": [],
"summary": "Establishes contract-goal requirements and related processes.",
"modified": [
"Specifies subcontracting participation thresholds (e.g., 75% of subcontract value by the designated type of business) and clarifies exemptions for prime contractors that are themselves such businesses."
]
},
"citation": "473.142",
"subdivision": "Subd.3"
},
{
"analysis": {
"added": [
"Allows direct solicitation and direct awarding to small businesses, small targeted group businesses, or veteran-owned small businesses designated under 16C.16 up to a total contract value (including extensions) specified in 16C.16 Subd.6(b) without a competitive solicitation."
],
"removed": [],
"summary": "Authorizes direct contracting and procurement methods.",
"modified": [
"Redefines the process by which certain contracts may bypass open competition when targeted to designated small businesses."
]
},
"citation": "473.142",
"subdivision": "Subd.4"
},
{
"analysis": {
"added": [
"Empowers rulemaking to implement the section."
],
"removed": [],
"summary": "Gives the council and agencies authority to adopt rules to implement 473.142.",
"modified": [
"Explicitly authorizes ongoing rulemaking to carry out the expanded preference framework."
]
},
"citation": "473.142",
"subdivision": "Subd.5"
},
{
"analysis": {
"added": [
"Imposes a requirement to pay any subcontractor within ten days of receipt of payment for undisputed services."
],
"removed": [],
"summary": "Requires prime contractors to pay subcontractors promptly and establishes interest penalties for late payments.",
"modified": [
"Sets a penalty interest rate (112 percent per month or portion thereof) on undisputed late amounts and sets minimum penalties for smaller balances."
]
},
"citation": "473.142",
"subdivision": "Subd.6"
},
{
"analysis": {
"added": [
"Excludes procurement financed in whole or in part with federal funds if the procurement is subject to federal disadvantaged minority or women business enterprise regulations."
],
"removed": [],
"summary": "Applicability rules for the section.",
"modified": []
},
"citation": "473.142",
"subdivision": "Subd.7"
},
{
"analysis": {
"added": [
"Requires annual reporting to the legislature by February 1 on contract awards, the use of preferences, and the effectiveness of goals and good-faith efforts."
],
"removed": [],
"summary": "Legislative reporting requirement.",
"modified": [
"Outlines the specific content to be reported, including program summaries, usage of preferences, goals, and incentive/penalty outcomes."
]
},
"citation": "473.142",
"subdivision": "Subd.8"
},
{
"analysis": {
"added": [],
"removed": [
"The requirement for contracts over $100,000 to have an affirmative action plan approved by the Minnesota Human Rights Department before contract execution; certification validity; and related revocation rules."
],
"summary": "Appendix content describing Certificates of Compliance for Contracts (to be repealed).",
"modified": [
"Describes the current certificates of compliance program that is repealed by this act."
]
},
"citation": "473.144",
"subdivision": "Paragraph a"
},
{
"analysis": {
"added": [],
"removed": [
"Requirements to execute a contract only if the business has a certificate of compliance issued by the commissioner or certifies compliance with federal affirmative action requirements."
],
"summary": "Appendix content applying to contracts over $100,000 with businesses not subject to Paragraph a but with more than 40 full-time employees.",
"modified": [
"Reiterates the alternative compliance route applicable to larger employers not subject to Paragraph a."
]
},
"citation": "473.144",
"subdivision": "Paragraph b"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cross-references to contracts administration provisions and reporting obligations related to the small business preferences.",
"modified": [
"Reinforces cross-references used in 473.142 related to contracting goals and reporting."
]
},
"citation": "473.143",
"subdivision": "Subd.1"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cited in 473.142 Subd.1 as the basis for the construction-related preference percentage.",
"modified": [
"Provides the statutory percentage for construction-related preferences by cross-reference to 161.321 Subd.2(a)."
]
},
"citation": "161.321",
"subdivision": "Subd.2, Paragraph a"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cited as the basis for the percentage used for goods/services preferences for small targeted group and veteran-owned small businesses.",
"modified": [
"Links the preference percentage to 16C.16 Subd.6(a)."
]
},
"citation": "16C.16",
"subdivision": "Subd.6, Paragraph a"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cited for the direct solicitation allowance up to the value in 16C.16 Subd.6(b).",
"modified": [
"Links the direct solicitation allowance to 16C.16 Subd.6(b)."
]
},
"citation": "16C.16",
"subdivision": "Subd.6, Paragraph b"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Cross-reference to 473.143 Subd.1 in the context of subcontracts and reporting to administration.",
"modified": [
"Makes explicit cross-reference to procurement authorities and reporting in Section 473.142."
]
},
"citation": "473.143",
"subdivision": "Subd.1 (cross-reference)"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Governs revocation of certificates issued under the related affirmative action provisions.",
"modified": [
"Cites Minnesota Statutes 363A.36 as governing revocation of certificates."
]
},
"citation": "363A.36",
"subdivision": ""
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Rules adopted by the Commissioner of Human Rights apply to this section.",
"modified": [
"Cites Minnesota Statutes 363A.37 as the rulemaking framework applicable to the section."
]
},
"citation": "363A.37",
"subdivision": ""
}
]Progress through the legislative process
In Committee