Source: https://texasattorneygeneral.gov/opinions/opinions/49cornyn/op/2000/htm/jc0315.htm
Timestamp: 2017-01-24 17:18:49
Document Index: 137752924

Matched Legal Cases: ['§ 466', '§ 466', '§ 2161', '§ 2161', '§ 2161', '§ 9', '§ 466', '§\n2161', '§\n2161', '§ 2161', '§ 311', '§ 311', '§ 2161', '§ 403', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§\n111', '§ 2161', '§ 2', '§ 1']

Tex. Att'y Gen. Op. No. JC-0315 (2000) -- John Cornyn Administration
Mr. C. Tom Clowe, Jr.
Chair Texas Lottery Commission
Opinion No. JC-0315
Re: Whether the Texas Lottery Commission may
count a lottery vendor's contracts with a broker or
"pass-through" entity toward the vendor's good
faith historically underutilized business participation
goal (RQ-0247-JC)
On behalf of the Texas Lottery Commission (the "Commission"), you ask whether the
Commission may count a lottery vendor's contracts with a broker or "pass-through" entity toward
the vendor's good faith historically underutilized business ("HUB") participation goal. We conclude
that the Commission may do so. We understand that your question arises from the contract award for the Commission's
instant tickets and services.(1) Apparently, the Commission's instant ticket vendor "requested
clarification of the steps it may take in fulfilling its requirement to make a good faith effort to include
HUBs . . . as subcontractors and suppliers in connection with its contract with the Commission."
Commission Letter of 10/13/00, note 1, at 1. You ask about the permissibility of the following
arrangement: The Commission enters into a contract with a vendor who
provides goods and/or services to the Commission. The Commission
establishes a good faith minority business or Historically
Underutilized Business ("HUB") participation goal for the vendor.
The vendor enters into a contract with a minority business or HUB to
provide goods and/or services in connection with the contract the
vendor has with the Commission. The minority business or HUB is
a supplier or broker of goods to the Commission's vendor. Such
goods are used by the Commission's vendor in connection with
providing the goods and/or services to the Commission. The minority
business or HUB purchases or obtains all or part of the goods
provided to the Commission's vendor from a non-minority business
or non-HUB entity. The Commission's vendor counts the dollars it
pays to the minority business or HUB toward its good faith minority
or HUB participation goal.(2)
You ask whether counting a lottery vendor's contracts with a broker or "pass-through" entity toward
the vendor's good faith HUB participation goal is permissible under chapters 466 and 2161 of the
Government Code and section 9-9.03 of the General Appropriations Act. See Request Letter, note
2, at 1. Before turning to your specific questions, we briefly review the statutory framework.
Procurement for the state lottery is generally governed by subchapter C of chapter 466, the State
Lottery Act. That subchapter includes a provision, section 466.107, which requires the executive
director of the Lottery Commission and each lottery operator to "take positive steps" to encourage
minority business participation, including "award[ing] contracts for lottery equipment or supplies
to minority businesses when possible" and "requir[ing] all bidders or contractors, when appropriate,
to include specific plans or arrangements to use subcontracts with minority businesses." Tex. Gov't
Code Ann. § 466.107(a)(3), (7) (Vernon 1998). Section 466.107 includes as "minority group
members" African Americans, American Indians, Asian Americans, Mexican Americans, and other
Americans of Hispanic origin; women are not included. See id. § 466.107(b)(2). On the other hand, under chapter 2161 of the Government Code, which generally governs
state agency contracts with historically underutilized businesses, a historically underutilized business
is one owned, or owned in part, by an "economically disadvantaged person." It provides that:
"[e]conomically disadvantaged person" means a person who is
economically disadvantaged because of the person's identification as
a member of a certain group, including Black Americans, Hispanic
Americans, women, Asian Pacific Americans, and Native Americans,
and who has suffered the effects of discriminatory practices or other
similar insidious circumstances over which the person has no control.
Id. § 2161.001(3) (Vernon 2000). Chapter 2161 authorizes the General Services Commission to
adopt implementing rules, to certify HUBs, and to encourage state agencies to use HUBs. See id.
§§ 2161.002, .061, .063. A state agency is required to "make a good faith effort to increase the
contract awards for the purchase of goods or services that the agency expects to make during
a fiscal year" to HUBs based on the rules adopted by the General Services Commission. Id.
§ 2161.181. The other provision you ask about, section 9-9.03 of the General Appropriations Act,
expresses the legislature's "intent" with respect to HUB participation in state contracts. See
General Appropriations Act, 76th Leg., R.S., ch. 1589, art. IX, § 9-9.03, 1999 Tex. Gen. Laws 5446,
6309-11. It is generally redundant of chapter 2161, and we do not discuss it separately. Before addressing your specific questions, we must address whether the Lottery
Commission's lottery contracts are governed by the minority business participation provisions of
section 466.107 or the HUB contracting provisions generally applicable to all state agencies.
Chapter 2161 of the Government Code is located in subtitle D of title 10 of the Government Code.
Section 466.105 of the Government Code, a provision of the State Lottery Act specifically governing
contracts of the Commission, provides that a contract for "the acquisition or provision of facilities,
supplies, equipment, materials, or services related to the operation of the lottery" is not subject to
subtitle D, title 10 of the Government Code. See Tex. Gov't Code Ann. § 466.105(a)(2) (Vernon
Supp. 2000). The Lottery Commission's general counsel informs us that the contract at issue falls
within this exemption. See Commission Letter of 10/13/00, supra note 1, at 2. However, section
2161.003 of the Government Code requires a state agency to adopt the General Services
Commission's rules regarding historically underutilized businesses and provides that those rules
apply to the agency's "purchases of goods and services paid for with appropriated money without
regard to whether a . . . purchase is otherwise subject to this subtitle." Tex. Gov't Code Ann. §
2161.003 (Vernon 2000). In addition, section 2161.004 provides that chapter 2161 and the General
Services Commission's rules "apply to state agency . . . purchases of goods and services that are paid
for with appropriated money and made under the authority of this subtitle or other law." Id. §
2161.004. The general counsel also informs us that the contract at issue was paid for with
appropriated money. See Commission Letter of 10/13/00, supra note 1, at 2. With respect to minority or HUB participation in Lottery Commission lottery contracts paid
with appropriated funds, chapters 466 and 2161 of the Government Code conflict. Chapter 466 of
the Government Code provides its own minority participation provisions for lottery contracts, which
are much less detailed and comprehensive than the chapter 2161 provisions and do not extend to
women-owned businesses, and generally exempts the Lottery Commission from all of subtitle D,
title 10 of the Government Code, including chapter 2161. On the other hand, sections 2161.003 and
2161.004 of chapter 2161 mandate that all state agencies adopt the rules promulgated by the General
Services Commission under section 2161.002 and apply those rules and chapter 2161 to purchases
paid for with appropriated money without regard to whether a purchase is otherwise subject to
subtitle D. See Tex. Gov't Code Ann. §§ 2161.003, .004 (Vernon 2000). We conclude that sections 2161.003 and 2161.004 prevail. Under the Code Construction
Act, "if statutes enacted at the same or different sessions of the legislature are irreconcilable, the
statute latest in date of enactment prevails." Id. § 311.025(a) (Vernon 1998). Section 466.107, the
minority business participation provision for state lottery contracts dates from 1991, as does section
466.105, the provision exempting lottery contracts from subtitle D, title 10.(3) The legislature adopted
sections 2161.003 and 2161.004 in 1999.(4) Because sections 2161.003 and 2161.004 are the later
enacted provisions, we conclude that they prevail. In addition, the Code Construction Act generally
provides that a more specific provision will prevail as an exception to a general provision "unless
the general provision is the later enactment and the manifest intent is that the general provision
prevail." Id. § 311.026(b). Although section 466.107 is more specific to the Lottery Commission
and lottery contracts, we believe that sections 2161.003 and 2161.004, later-enacted general
provisions, manifest the legislature's intent that they prevail. See id. §§ 2161.003 (mandating that
General Services Commission rules apply to an agency's "purchases of goods and services paid for
with appropriated money without regard to whether a . . . purchase is otherwise subject to this
subtitle") (emphasis added); .004(a) ("This chapter and rules adopted by the commission under this
chapter apply to state agency construction projects and purchases of goods and services that are paid
for with appropriated money and made under the authority of this subtitle or other law.") (emphasis
added), (c) (excepting only project or contract under section 201.702 of the Transportation Code
from section 2161.003 and subsections (a) and (b) of section 2161.004). The Commission has promulgated a rule adopting the General Services Commission's rules
as its own rules, as required by section 2161.003. See Commission Letter of 10/13/00, supra note
1, at 3; see also 25 Tex. Reg. 7300, adopted 25 Tex. Reg. 9954 (2000) (to be codified at 16 Tex.
Admin. Code § 403.301). We assume that the contract at issue is governed by the Commission's
rule, which became effective October 2, 2000. Accordingly, we conclude that your questions are
governed by the General Services Commission rules adopted by the Lottery Commission as required
by section 2161.003. The General Services Commission rules adopted by the Lottery Commission, sections 111.11
through 111.28 of title 1 of the Texas Administrative Code, provide that:
[i]t is the policy of the commission to encourage the use of
historically underutilized businesses (HUBs) by state agencies and to
assist agencies in the implementation of this policy through race,
ethnic, and gender-neutral means. The purpose of this program is to
promote full and equal business opportunities for all businesses in
state contracting in accordance with the goals specified in the State
of Texas Disparity Study. 25 Tex. Reg. 3232-35 (2000) (to be codified as an amendment to 1 Tex. Admin. Code § 111.11).
The rules establish criteria for HUBs, require state agencies to make a good faith effort to utilize
HUBs in contracts, and provide that agencies may achieve goals by contracting directly with HUBs
or indirectly through subcontracting opportunities. See 25 Tex. Reg. 3119-21, adopted 25 Tex. Reg.
5621 (2000) (to be codified as an amendment to 1 Tex. Admin. Code § 111.12); 25 Tex. Reg. 3232-35 (2000) (to be codified as an amendment to 1 Tex. Admin. Code 111.13). We now turn to your specific questions. First, you ask "[w]hether . . . purchases made [by
the vendor] through a minority business or HUB 'pass-through' entity or broker [may] be counted
toward the [vendor's] good faith minority business participation goal." Request Letter, supra note
2, at 1. We conclude that the General Services Commission rules permit the Lottery Commission
to count purchases made through a HUB "pass-through" entity or broker toward a vendor's good
faith HUB participation goal. Nothing in the rules prohibits the use of a "pass through" entity or
broker. Indeed, the rules specifically embrace subcontracts, providing that agencies may achieve
goals by contracting directly with HUBs or indirectly through subcontracting opportunities. See 25
Tex. Reg. 3232-36 (2000) (to be codified as an amendment to 1 Tex. Admin. Code §§ 111.13, .14).
Furthermore, the rules define the term "HUB" quite broadly, as a business a certain percentage of
which is owned by a person or persons who have been "economically disadvantaged because of their
identification as members" of certain groups. See 25 Tex. Reg. 3119-21, adopted 25 Tex. Reg. 5621
(2000) (to be codified as an amendment to 1 Tex. Admin. Code § 111.12(11)(A), (B)). The business
may be a corporation, sole proprietorship, partnership, joint venture, or a supplier contract in which
the HUB supplier is directly involved in the manufacture or distribution of the supplies or materials
or otherwise warehouses and ships the supplies. See id. (to be codified as an amendment to 1 Tex.
Admin. Code § 111.12(11)(C)-(G)). Even more generally, the business may be one "which is formed
for the purpose of making a profit and is otherwise a legally recognized business organization under
the laws of the State of Texas." Id. (to be codified as an amendment to 1 Tex. Admin. Code §
111.12(11)(H)). Although we cannot determine whether a particular business meets any of these
criteria, we believe that a "pass-through" entity or broker could qualify as a historically underutilized
business as that term is defined in the General Services Commission rules. If we conclude that purchases made through a HUB "pass-through" entity or broker may be
counted toward a vendor's good faith HUB goal, you also ask whether "the amount to be counted
toward the goal [is] the total amount of goods and services purchased from the non-minority
manufacturer through the . . . HUB 'pass-through' entity or broker or the amount actually retained
by the minority or HUB 'pass-through' entity or broker for its services." Request Letter, supra note
2, at 2. The General Services Commission rules do not address this issue, nor does any other rule,
statute, or legal opinion of which we are aware. In the absence of any controlling law, we believe
your question is a policy question, rather than a legal question within the purview of an attorney
general opinion. The legislature, by authorizing the General Services Commission to promulgate
HUB contracting rules, to require information from state agencies regarding their HUB contracts,
to certify HUBs, and to assist state agencies in using HUBs, see Tex. Gov't Code Ann.
§§ 2161.002, .061, .063 (Vernon 2000), has vested the General Services Commission with the
authority to implement state law and make policy in this area. Accordingly, we suggest that the
Lottery Commission seek the advice of the General Services Commission with respect to this
question. S U M M A R Y
The Texas Lottery Commission may count a lottery vendor's
contracts with a broker or "pass-through" entity toward the vendor's
good faith historically underutilized business participation goal. Yours very truly,
1. See Letter from Kimberly L. Kiplin, General Counsel, Texas Lottery Commission, to Susan D. Gusky, Chair, Opinion Committee, Office of the Attorney General (Oct. 13, 2000) (on file with Opinion Committee) [hereinafter Commission Letter of 10/13/00].
2. Letter from Mr. C. Tom Clowe, Jr., Chair, Texas Lottery Commission, to Honorable John Cornyn, Texas Attorney General at 1 (June 14, 2000) (on file with Opinion Committee) [hereinafter Request Letter].
3. See Act of Aug. 13, 1991, 72d Leg., 1st C.S., ch. 6, § 2, secs. 2.04, 2.06, 1991 Tex. Gen. Laws 197, 201, 203. 4. See Act of May 30, 1999, 76th Leg., R.S., ch. 1499, § 1.23, 1999 Tex. Gen. Laws 5164, 5169. POST OFFICE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL: (512) 463-2100 WEB: WWW.OAG.STATE.TX.US