Texas Historically Underutilized Business Certification and Low Program Utilization

Government agencies rely on vendors to buy the goods and services they need to operate and fulfill their missions, competitively awarding contracts through a competitive bidding process governed by law. State and local agencies offer preferences to small disadvantaged businesses in an aim to level the playing field so they can effectively compete against other. Many times, better situated and larger, more established companies have a greater competitive advantage. Such programs are offshoots of the affirmative action initiatives begun under President Johnson in the mid-late 1960s. Little study has been conducted in this area, and large research gaps exist. In Texas, such a preference is given through the Historically Underutilized Business program, where 35 percent of everything the State buys must be awarded to businesses owned by minorities, women and service-disabled veterans first. Despite Texas’ claim of being pro-business and being a champion for small businesses, annual reports consistently show the program as significantly underutilized by over 15 percent the past 34 years since it started. Of the 3.5 million small businesses in the state, fewer than 17,000 are certified. Using a qualitative design grounded in a hybrid conceptual model, with a focus on the Diffusion of Innovations Theory and Theory of Planned Behavior, this study attempts to better understand the phenomenon of why most qualified small businesses do not pursue Texas HUB certification. It gathers input from disadvantaged owners by questionnaire to solicit feedback, identify root causes of non‑participation and develop an action plan of recommendations, offering State officials a framework for policy improvement. To achieve parity in public procurement, the State needs to do more work in ensuring these preference-driven programs represent the very groups it hopes to help more significantly.