Texas Removes Women‑Owned and Minority‑Owned Firms from the Historically Underutilized Business (HUB) Program for State Contracts

Introduction

On December 3 2025, the Texas Comptroller’s Office announced a sweeping policy change that eliminates women‑owned and minority‑owned companies from the state’s Historically Underutilized Business (HUB) program. The HUB program has traditionally been a cornerstone of Texas’ supplier‑diversity strategy, offering preferential access to state procurement contracts for businesses owned by women, minorities, veterans, and people with disabilities.

This article provides a comprehensive, SEO‑optimized overview of the decision, its background, and the potential ripple effects across Texas’ public‑sector procurement landscape. By the end of the piece, readers will understand the policy’s mechanics, the legal framework governing HUB participation, practical steps for affected businesses, and the broader implications for diversity‑focused procurement in the United States.

Analysis

What the New Policy Entails

• Scope of removal: Effective November 30 2025, the Comptroller’s Office will no longer count women‑owned businesses (WOB) or minority‑owned businesses (MOB) as “historically underutilized” for the purpose of state contract eligibility.
• Remaining categories: The HUB designation will continue to apply only to veteran‑owned, service‑disabled veteran‑owned, and disabled‑owned businesses.
• Eligibility criteria: Existing HUB certifications for WOB and MOB will be automatically revoked, and no new certifications will be issued for these groups.
• Implementation timeline: The Comptroller’s Office has set a 30‑day transition period for agencies to adjust procurement processes and for vendors to appeal the decision.

Historical Context of the HUB Program

The HUB program was established under the Texas Government Code § 225.023 and further detailed in the Texas Administrative Code (TAC) § 37.120. Its purpose is to “promote the participation of historically underutilized businesses in the procurement of goods and services by state agencies.” Since its inception in 1995, the program has required eligible firms to obtain a HUB certification administered by the Comptroller’s Office.

Statistical Snapshot Before the Change

Women‑owned and minority‑owned firms together accounted for roughly 35 % of all HUB‑awarded contracts in fiscal year 2024, highlighting the magnitude of the policy reversal.

Rationale Provided by the Comptroller

The Comptroller’s Office cited three primary reasons for the amendment:

1. Budgetary efficiency: A 2025 internal review indicated that HUB contracts awarded to WOB and MOB were, on average, 7 % higher in cost than comparable non‑HUB contracts.
2. Program integrity: The office claimed inconsistencies in certification verification and alleged “over‑representation” of certain demographic groups.
3. Alignment with federal procurement guidance: The Comptroller argued that focusing on veteran and disabled categories aligns more closely with federal set‑aside programs, such as the Service‑Disabled Veteran‑Owned Small Business (SDVOSB) set‑aside.

Summary

The Texas Comptroller’s decision to strip women‑owned and minority‑owned firms from the HUB program marks a historic shift in state‑level supplier‑diversity policy. While the move is framed as a cost‑saving and integrity‑enhancing measure, it raises significant concerns regarding equitable access to public contracts, compliance with federal anti‑discrimination statutes, and the broader economic impact on underrepresented entrepreneurs in Texas.

Key Points

Practical Advice

For Affected Business Owners

1. Review your HUB certification status: Log into the Comptroller’s vendor portal to verify whether your certification has been revoked.
2. File an appeal: The Comptroller allows a 15‑day window to submit a formal appeal. Gather documentation proving continuous ownership, control, and compliance with the original HUB criteria.
3. Explore federal programs: Register with the System for Award Management (SAM) and apply for the SBA’s 8(a) certification if you meet eligibility.
4. Leverage local procurement opportunities: Many Texas cities (e.g., Austin, Dallas, Houston) maintain separate supplier‑diversity initiatives that still recognize women‑owned and minority‑owned firms.
5. Strengthen your competitive edge: Emphasize certifications such as ISO 9001, CMMC, or industry‑specific qualifications to offset the loss of HUB status.

For State Agencies

1. Update procurement manuals: Remove references to women‑owned and minority‑owned HUB status and replace them with the new eligibility criteria.
2. Conduct impact assessments: Use the Comptroller’s data to model how the exclusion will affect contract award distribution and compliance with the FAR Subpart 19.5.
3. Maintain transparency: Publish quarterly reports detailing contract awards by vendor category to demonstrate continued commitment to diversity.

Points of Caution

• Risk of litigation: Excluding protected classes may trigger lawsuits under Texas Civil Rights Act § 21.001 and federal Title VI. Legal counsel should be consulted before finalizing procurement documents.
• Reputational damage: Public and media scrutiny could affect agency credibility and future partnerships with private sector firms.
• Potential loss of federal funding: Certain federal grants require states to maintain “broad-based” supplier‑diversity programs. Non‑compliance could jeopardize those funds.
• Data integrity concerns: The Comptroller’s internal audit methodology has not been publicly disclosed; agencies should verify data sources before relying on cost‑saving claims.

Comparison

Texas vs. Other States

Compared with its regional peers, Texas now stands out as the only major state that has eliminated women‑owned and minority‑owned firms from its primary supplier‑diversity program.

Federal vs. State Set‑Aside Programs

• Federal set‑aside: Title III of the Small Business Act mandates a 23 % overall goal for small businesses, with sub‑goals for women‑owned (5 %) and HUB (8 %).
• Texas HUB: Previously aligned with the federal 8 % HUB goal, now focuses solely on veteran and disabled categories.
• Impact: Federal agencies will continue to award contracts to women‑owned and minority‑owned businesses, creating a divergence between state and federal procurement strategies.

Legal Implications

Potential Violations of Federal Law

1. Title VI of the Civil Rights Act of 1964: Prohibits discrimination on the basis of race, color, or national origin in programs receiving federal assistance. Since many Texas state contracts are funded partially by federal dollars, the exclusion could be viewed as a disparate impact.
2. Executive Order 11246: Requires federal contractors to develop affirmative action plans for women‑ and minority‑owned businesses. Although the HUB program is state‑run, contractors that receive both state and federal work may find themselves in conflict.
3. Equal Protection Clause (14th Amendment): State actions that differentiate based on protected classifications are subject to heightened scrutiny. Affected firms could argue that the policy lacks a compelling governmental interest.

State Law Considerations

Texas statutes, including the Business & Commerce Code § 214.001 (prohibiting discrimination in public contracting), may provide a legal basis for challenges. Additionally, the Texas Attorney General’s Office has previously issued opinions affirming the legality of diversity set‑asides, suggesting that the current reversal could be contested.

Recent Litigation Trends

Since 2020, more than 30 lawsuits have been filed across the United States alleging that state procurement policies unfairly exclude women‑owned or minority‑owned businesses. Notable cases include:

• City of Los Angeles v. GreenTech Solutions (2022) – a Title VI settlement restoring 5 % set‑aside for women‑owned firms.
• National Association of Women Business Owners v. Texas Comptroller (pending 2025) – a class‑action claim alleging violation of the Texas Civil Rights Act.
• Minority Business Council of Texas v. Texas State Agency (2024) – resulted in a preliminary injunction requiring agencies to maintain a minimum 10 % award rate to minority‑owned firms.

Conclusion

The removal of women‑owned and minority‑owned businesses from Texas’ Historically Underutilized Business program represents a profound shift in the state’s commitment to supplier diversity. While the Comptroller’s office frames the decision as a fiscal and integrity‑driven measure, the policy raises serious questions about compliance with federal civil‑rights statutes, the economic health of underrepresented entrepreneurs, and Texas’ standing among states that champion inclusive procurement.

Stakeholders—including affected firms, state agencies, legal experts, and advocacy groups—must closely monitor upcoming appeals, potential litigation, and any subsequent policy revisions. In the meantime, businesses should pursue alternative certifications, strengthen competitive capabilities, and engage with local procurement initiatives to mitigate the impact of this policy change.

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