Employment / 3 min read
As discussed in a client update earlier this month, recent developments at the federal and state levels have reshaped the legal landscape for race-and sex-based contracting preferences. In Texas, the Comptroller has suspended new Historically Underutilized Business (“HUB”) certifications and directed agencies to ensure procurement is conducted without awarding preferences based on race, ethnicity, or sex. The federal government has likewise taken steps to end preferences based on race and sex and to significantly alter existing Disadvantaged Business Enterprise (“DBE”) programs. At the same time, contracts requiring such preferences continue and certain municipalities and government agencies have suggested that they will continue to require HUB and DBE preferences in some form. This divergence presents legal and operational risk for contractors bidding on municipal work.
The Current Legal Environment
Texas policy now prohibits awarding government contracts based on race, ethnicity, or sex. While these directives target state agencies, certain municipalities that continue race-or sex-based preferences—whether through mandatory HUB/DBE participating thresholds, bonus points for certification status, or contractor “good faith effort” requirements—are at heightened risk of challenge. Contractors should expect increased scrutiny of municipal procurement practices and should plan accordingly.
Identifying Risk in Municipal Solicitations
Contractors should review municipal solicitations carefully to isolate elements likely to conflict with current state and federal guidance. Red flags include any scoring criteria that award points based on HUB/DBE status; mandatory participation quotas keyed to race- or sex-based classifications; and “good faith effort” requirements that are, in substance, participation mandates. Even where municipalities describe their programs as “aspirational,” the practical effect matters, the preference may still violate the state mandate. Conversely, race- and sex-neutral measures—such as broad outreach, transparent publication of subcontracting scopes, and neutral small-business support—are less likely to implicate the state ban.
Practical Steps When a Municipality or Agency Still Requires HUB/DBE Type Preferences
Contractors face a dual imperative: preserve eligibility and competitiveness in municipal bids while protecting legal rights and maintaining compliance with state policy.
- Seek clarification early. Submit written pre-bid questions that ask the municipality to confirm whether any HUB/DBE participation goals or scoring criteria are mandatory, how noncompliance affects responsiveness or scoring, and whether race- and sex-neutral alternatives are acceptable. Request explicit confirmation that no points will be awarded solely on the basis of race, ethnicity, or sex, and that any outreach requirements are neutral as to protected characteristics.
- Propose neutral compliance pathways. If the solicitation prescribes a subcontracting plan keyed to HUB/DBE participation, ask whether the municipality will accept a plan focused on race- and sex-neutral small business engagement, open competitive selection of subs, transparent publication of scopes, and broad outreach to all qualified firms. Where possible, submit a subcontracting plan that meets the municipality’s stated objectives (inclusion, competition, support for small and disadvantaged firms) without committing to targets based on protected characteristics.
- Preserve your rights without compromising bid competitiveness. Include a short reservation of rights in your submission that acknowledges the municipality’s or agency’s requirements, affirms your intent to comply with applicable law, and notes that you are not agreeing to any condition that would require preferencing based on race, ethnicity, or sex.
- Evaluate and execute neutral outreach rigorously. Regardless of HUB/DBE preferences, robust outreach to qualified subcontractors is a practical necessity. Publicize scopes and packages widely; solicit quotes from a diverse pool of firms; ensure fair, competitive selection based on objective criteria; and document the process. Comprehensive documentation of outreach and evaluation—emails, bid invitations, scoring matrices, selection rationale—both strengthens your bid and protects you in any dispute over alleged noncompliance with participation goals.
Conclusion
Contractors bidding municipal work should anticipate lingering HUB/DBE preference frameworks and prepare to navigate them pragmatically.