DAN MORALES 

AlTORNEY GENEaN. 

QBffice of tip !Zlttornep @enera 

%tate of aexae 

Mr. Carl Mullen 

Deputy Director 

General Services Commission 

P.O. Box 13047 

Austin, Texas 7871 l-3047 

March 9,1995 

Opinion No. DM-328 

Re: Whether the General Services Commission has the authority to promulgate a 

rule to deem busmesses owned by 

individuals with disabiities as %istorically 

underutilized businesses” as that term is 

de&d in section 1.02(3) of article 6Olb, 

V.T.C.S. (RQ-721) 

Dear Mr. Mullen: 

On behalf of the General Services Commission (the “commission”), you ask 

whether the commission has the authority to promulgate a rule to deem businesses owned 

by individuals with disabilities as ‘historically underutilized businesses” as that term is 

detined in section 1.02(3) of article 601b, V.T.C.S. Section 1.02(3) defines the term 

“historicahy underutilized business*’ to mean a business that is owned (or, in the case of a 

corporation or partnership, at least fifty-one percent owned) by one or more persons who 

are socially disadvsntaged because of their identification as members 

of certain groups, includmg black Americans, Hispanic Americans, 

women, Asian Pacitic Americans, and Native Americans, and have 

s&bred the effects of discriminatory practices or siiar insidious 

circumstances over which they have no control. 

V.T.C.S. art. 601b, 3 1.02(3)(A)(i).* 

*8cction 1.020) in its entirety provides as follows: 

(A) a mrpation formed for the pups of making a profit in which at 

least51perantofallclassaofthesharrsofstodrorotheroquitablcseeuritia 

IUCOWlCdbyOneOrmOrrpcrJonsWbo: 

(i) are scciatly disadvantaged becaweoftbciridentificationas 

mcmatsofccrtaingroups,inchidingblackAmuica~~,Hispauic 

Americans, wmcn, Aaiaa Pa&c Amuicans, and Native Amcricaos, ad 

bavc aoffcrul the effects of disctiminatory pracliccs or aimihr insidious 

cimwtancesowrwhichtheyhawnocontro~and 
Mr. Carl Mullen - Page 2 (DM-328) 

Section 1.03 of article 6Olb requires the commission to “certify businesses that are 

historically underutilized businesses.” Id. 5 1.03(a). Section 1.03 also requires the 

commission and state agencies to compile information regarding contracts awarded to 

historically underutilii businesses. Id. $1.03(c) - (d), (g), (k), (m). The commission is 

required to offer assistance to historically underutilii businesses regarding state 

procurement procedures and opportunities and to encourage state agencies to use 

historicshy underutiliaed businesses. Id. fj 1.03(i), (p). Section 3.10(b) of article 601b 

requires the commission and state agencies to “make a good faith efhort to assist 

historicdly underutilized businesses to receive not less than 30 percent of the total value of 

all contract awards. . that the commission or other agency expeots to make during a 

fiscal year.” Both section 1.02(3) and section 1.03, the relevant provisions here, were 

enacted by the legislature in 1991 and amended in 1993. See Act of May 23,1991,72d 

Leg., RS., ch. 677, $5 I - 2, 1991 Tex. Sess. Law Serv. 2457,2457-58 (adding sections 

1.02(3) and 1.03); Act ofMay 19, 1993, 73d Leg., RS., ch. 684, §$ I, 3, 1993 Tex. Sess. 

Law Serv. 2540,2540-41 (amendmg sections 1.02(3) and 1.03). 

Having reviewed article 601b and its legislative history, we conclude that the 

commission does not have the authority to promulgate a rule deeming businesses owned 

by individuals with disabiities as “historically underutilized businesses” as that term is 

de&d in section 1.02(3) and used in section 1.03 of article 6Olb, V.T.C.S. The 

de&&ion of the term “historically underutilized business” in section 1.02(3) refers to 

persons with two characteristics; first, persons ‘kho are socially disadvantaged because of 

their identification as members of certain groups, inchtding black Americans, Hispanic 

Ameritxns, women, Asian Pacitlc Americans, and Native Americans,” and, second, 

(ii) have a propdonate interest and demoastrate active pauictpation 

in the contrel, cpcration, aad msaa8emeat of the corpaatioa’s affairs; 

(C) a partmship formed for the prose of making a pmrit in which at 

least5lperantoftheassetsandinterestintbepartncrshipisowaedbyoncor 

more persons who: 

(i) are dcrixihcd in paragraph (A)(i) of this mhdivistcn; aad 

(it)haveaprcpcrttonateintere5tauddaaonsaate aelivc parlieipstioa 

in the amtml, eperatien, sad managcmmt of the mrperation’s affatrs; 

(D) a joint venture in which each entity in thejoint vennnv is a htstaiwny 

uademtilized hushtess nnder this subd%ion; or 

(2) a supplier contract hemvea a histcricatly undemtiIizcd business aader 

this s&division and a prim contractor under which the historically undemtilii 

business is dimctly involved in the marnd&ctnre or distriion of the sapplies or 

mterials or rkhcnke ware- and abips the supplies. 

p. 1736 
Mr. Carl Mullen - Page 3 (DM-328) 

persons who “have suffered the effects of discriminatory practices or similar insidious 

circumstances over which they have no control.” Although individuals with disabilities 

may certainly have the latter of these two characteristics, we believe that the legislature 

did not intend for the term “‘group” used in describing the first characteristic to embrace 

persons identified as members of groups other than those defined by gender, race, or 

ethnicity. 

This conclusion is based on our review of both article 6Olb and the legislative 

history of the historically underutilized business provisions. Fi individuals with 

disabiities are mentioned nowhere in section I .02(3) or I .03. Subsection (A)(i) of section 

1.02(3) refers solely to persons idemified as memlmrs of groups defined by gender, race, 

or ethnicity. Furthermore, subsection (g) of section 1.03 requires the wmmission, in 

cooperation with the comptroller and state agencies, to “categorize each historically 

underutilized business that is included in a report under this section by sex, race, and 

ethnicity.” We believe that ifthe legislature had intended persons identified as members of 

groups other than those defmed by gender, race, and ethnicity to q&ii as historically 

underutilized businesses that it would have prescribed other, or at least broader, reporting 

categories. In addition, the legislative history is devoid of any references to persons 

identified as members of groups other than those defined by gender, race, and ethnic&y. 

See, e.g., House Research Orgamzation, Bii Analysis, H.B. 799, 72d Leg. (1991); see 

also House Special Comm. on Bus. Owned by Women or Minorities, Interim Report to 

the 7lst Texas Legislature (1989).2 

Piily, we note that the 1991 and 1993 appropriations acts wntain provisions 

regardii state wntracts with historically underutilii businesses applicable to any 

appropriation to a state agency. The 1993 appropriations act defines the term ‘historically 

underutilized business” to mean: 

a corporation formed for the purpose of making a profit in which at 

least 5 I percent of all classes of the shares of stock or other equitable 

securities are owned by one or more persons who have been 

historically undemtihxd because of their identification as women or 

as members of certain minority groups, including Black Americans, 

Hispanic Americans, women, Asian Pacific Americans, and Native 

Americans who have suffered the effects of discriminatory practices 

or similar insidious circumstances over which they have no control. 

General Appropriations Act, 73d Leg., R.S., ch. 1051, pt. V, 5 101(2)(a), 1993 Tex. Sess. 

Law Serv. 4521, 5379. The detinition in the 1991 appropriations act is similar. See 

Oeneral Appropriations Act, 72d Leg., 1st C.S., ch. 19, pt. V, 5 106(2)(a), 1991 Tex. 

zTbc1991lcgislationwasdcscn‘bcdatabtaring~thcHouceCo~~onStatc~byits 

author as coming out of this imaim mmmittec. licmings on HB. 799 Before lhe House Comm. on State 

Afbim, 72d Leg. (March 18, 1991) (testimony of Fkpmentativc htton). 

p. 1737 
Mr. Carl Mullen - Page 4 (DM-328) 

Sess. Law Serv. 365, 1042. The 1993 appropriations act also provides that it is the intent 

of the legislature that state agencies report certain information about state wntracting to 

the General Services Commission “classified by minority group status as defined in 

subsection 2.a above and by gender.” General Appropriations Act, 73d Leg., RS., ch. 

1051, pt. V, 4 101(8)(a), 1993 Tex. Sess. Law Serv. 4521, 5380. Although these 

appropriations act provisions are not intended to create substantive law,3 we believe it is 

signiticant that th9 too describe and discuss historically under&ii businesses solely in 

terms of businesses owned by persons identitkd as members of groups defined by gender, 

raw, and ethnicity. 

In wnclusion, it is a well-established legal principle that an administrative agency 

“can adopt only such rules as are authorized by and wnsistent with [its] statutory 

authority.” See Texar Fire & CasuaIty Co. v. Harris Coun~~ Bail Band Bd., 684 S.W.2d 

177, 178 (Tex. App.-Houston [14th Dist.] 1984, writ refd n.r.e.). Because the term 

“historically underutilized busines.F as de&ted by section 1.02(3) is limited to businesses 

owned by persons identified as members of groups detined by gender, raw, or ethnic&y, 

we must conclude that the wmmission is not authorized to promulgate a rule to deem 

businesses owned by indiiduals with disabilities as “historically underutilii businesses.” 

Such a rule would be inwnsistent with the statute. 

Of wurse, the legislature is free to amend section 1.02(3) to include busmesses 

owned by individuals with disabilities within the defmition of historically underutilii 

businesses ifit determines such an amendment is appropriate. In this regard, we note that 

we do not believe that such an amendment would be inwnsistent with sections 3.20,3.22, 

and4.15ofsrticle601borchapters94and122oftheHumanResourcesCode,theother 

provisions about which you inquire. These provisions pertain to state purchases of goods 

and services from nonprofit agencies and other organizations that train individuals with 

disabilities or to the licensing of certain persons to operate certain state facilities.4 None 

QoIh apprepriations aet pmvistoas mgardta8 hisanicslly Mdmailized bmiaesscs amtaia me 

follcwinglaa8va8e: ~Sscnionisan~~~oftheintmt~tbcLegislatunandQsmtimposca 

dutymtalnadyprwidedforbygenerallaworncgatcapowcr~bygenaalLaw.” S&General 

Ap~nqniations Act, 72d Leg., 1st C.S., ch. 19, pt. V, 0 W(3), 1991 Tex gcs.8. Law Serv. 365, 1043; 

Genual Appqmiatim Aet 73d Leg., KS., ch. 1051, pt. V, &S 101(3), 1993 Tex. Sess. Law km. 4521, 

5379. 

‘Section 3.20 of article 6olb pmides that “pmdom of workshops, organizations, or corporations 

whoseprimarypuposeisvainingmdclnplayingmentallyrrtardedorphysicellybandi*lppebpnsoar 

shall be given preference if they meet state specilications as to quantity, quality, and price.” siy. 

section 3.22 provides Ihat the mmpetitive bidding provisions of article 6Olb atx not applicable “to state 

purchastsofblindaradegoodsor~aso&rcdforsPlctostateagcaciaMaresult~cffonsmadcby 

tbcTarasCommiacconPurchags~BLiad-MedcGoodsandSavias”cnatalbychapcr122aftbc 

Elmnan Raourca Code. SectIon 122.004(a) of the Humsa Remme6Codemakesitclearthat”blindmade goods and services” tefem to goods and services offertd for sale by nonprofit agencies. sation 

p. 1738 
Mr. Carl Mullen - Page 5 (DM-328) 

of these provisions pertain to state contracting with for-profit businesses owned by 

individuals with disabilities. 

SUMMARY 

The General Services Commission does not have the authority to 

promulgate a rule to deem businesses owned by individuals with 

disabiities as “historically underutilized businesses” as that term is 

deiined in section 1.02(3) of article 6Olb, V.T.C.S., because the 

legislature did not intend that term to refer to businesses other than 

those owned by persons who are socially disadvankged because of 

their identifkation as members of groups defined by gender, race, or 

ethnicity. 

DAN MORALES 

Attorney General of Texas 

JORGE VEGA 

Fii Assistant Attorney General 

SARAH J. SHIRLEY 

Chair, Opiion Committee 

Prepared by Mary R. Grouter 

Assistant Attorney General