(1)
Definitions. The
following terms shall have the meanings in
425
CMR 2.02(1) or, if such
terms have been assigned meanings in M.G.L. c. 7, § 58, the following are
in addition thereto:
Applicant. For-profit business
enterprise or non-profit organization that applies to become a Certified
Entity.
Certification Categories. Minority
Business Enterprise (MBE), Minority Non-Profit Organization (MNPO), Women
Business Enterprises (WBE), Women Non-Profit Organization (WNPO), Portuguese
Business Enterprise (PBE), Veteran Business Enterprise (VBE), Veteran
Non-Profit Organization (VNPO), Disability-Owned Business Enterprise (DOBE),
Lesbian, Gay, Bisexual, and Transgender Business Enterprise (LGBTBE),
Service-Disabled Veteran-Owned Business Enterprise (SDVOBE), and any other
category as established by M.G.L. c. 7, § 58, other statute, or by
executive order.
Certified Entity. An Applicant
certified by the SDO, or an SDO approved Third-Party Certifier, pursuant to
425 CMR
2.00 in one or more certification categories, as
defined in
425
CMR 2.02(1) and in M.G.L.
c. 7, § 58.
Controlled. One or more eligible
principals have the legal authority to make and in fact make, all major
decisions of the applicant without being subject to any agreement or document
restricting control, or the approval or veto of any other person, business
enterprise, or organization which by virtue of its business relationship to the
applicant may be in a position to influence eligible principal's decisions; and
having dominant control in the conducting of all major aspects of the business.
This includes:
(a) having dominant
control over management and daily operations;
(b) having, in the specific endeavors which
generate the applicant's revenues, the demonstrable background, all legally
required credentials, and the technical competence necessary to weigh all
advice given and to make independent and unilateral determinations relating to
the activities engaged in by the applicant, including key determinations
relating to the day-to-day work of employees and workforce involved
operationally and technically; although an eligible principal must have
managerial experience and/or expertise needed to run the business, he or she
need not possess a license (unless required by a state law or regulation that a
firm owner hold a required credential) to be found to control a company if he
or she can demonstrate that he or she has ultimate managerial and supervisory
control over those who possess the required license or technical expertise.
However, where a critical license is held only by a non-eligible key employee
or person having an equity interest in the applicant firm, the non-eligible
person may be found to control the firm;
(c) having a thorough knowledge of the
financial structure, policies and affairs of the applicant;
(d) having dominant control of the financial
affairs and accounts of the applicant;
(e) having dominant control over the hiring
and firing of employees, including key employees, as well as any other
personnel and workforce decisions of the applicant;
(f) having dominant control over the
solicitation and negotiation of contracts, marketing, estimating, and the
offering and acceptance or rejection of bids;
(g) having dominant control over the purchase
of goods, equipment, business inventory and services needed in the day-to-day
operation of the applicant; and
(h)
having dominant control over the applicant's governing body, if any, as
described below:
1.
Corporations: one or more eligible principal(s) of the
same certification category must hold the highest officer position and either
individually or collectively possess control over the Board of
Directors.
2.
Partnerships, Limited Liability Corporations (LLCs), and Limited
Liability Partnerships (LLPs): one or more eligible principal(s)
of the same certification category must serve as general partner(s), managing
member(s) or managing partner(s) as applicable, and possess control over all
partnership, LLC, or LLP decisions.
3.
Sole
Proprietorships: ultimate operational control must vest in an
eligible principal whose name appears on firm documentation.
4. For non-profit organizations, depending on
structure, one or more eligible principal(s) must either individually or
collectively hold the highest officer position in the firm
(e.g., chief executive officer or director) and eligible
principal(s), of the same certification category as the highest officer
position holder, must possess ultimate individual or collective control over
the organization's governing body and/or Board of Directors.
(i) In addition, the following
factors must be considered in determining dominant control:
1. The eligible principal(s) shall not be
found lacking dominant control solely on the basis of the terms of a
franchise/license agreement that relate to standardized quality, advertising or
accounting format, as long as the franchiser or licenser is independent from
the franchisee or licensee.
2. The
eligible principal(s) shall not be found lacking dominant control solely on the
basis of his or her outside employment. However, if it can be shown that
outside employment actually interferes with the individual's ability to
ultimately either individually or collectively control the applicant on a
full-time basis, the applicant may not be certified.
3. The eligible principal(s) shall not be
found lacking dominant control solely on the basis of her or his level of
remuneration which may be lower than that of some other participants in the
firm. Differences in remuneration will be considered in the context of the
duties of the persons involved, the firm's policy and practice concerning
reinvestment of income, and any other explanations.
4. The eligible principal(s) shall not be
found having dominant control if the applicant fails the test for independence
as defined in
425
CMR 2.02.
5. Where appropriate, dominant control shall
be considered in the context of normal industry practices.
Credentials. Documentary evidence of
an eligible principal's lawful authority; commonly in the form of letters,
licenses or certificates which on their face indicate the legal authority and
capacity of the bearer.
Eligible Person. An adult permanent
resident of the United States who is a minority, veteran, person of Portuguese
origin, LGBT individual, person with a disability, and/or a woman.
Eligible Principal. Eligible person
represented by the applicant to be an owner of the business enterprise or in
control of a non-profit organization. Assets held in trust will be examined on
a case by case basis to ensure that at least 51% of the trust's
beneficiary(ies) is (are), either individually or collectively, held by
eligible person(s) of the same certification category, and that the operational
control of the applicant by eligible principal(s) is not unduly restricted by
(an) ineligible trustee(s) or beneficiaries.
Free from Conversion Rights. Neither
the applicant nor the eligible principal(s) is (are) subject to any right,
agreement, option, scheme or document that creates or is representative of any
right, which, if exercised, would result in diluting the ownership of the
eligible principal(s) in the applicant below 51% or cause the applicant to not
be independent or controlled by one or more eligible principals or eligible
persons.
Independent.
(a) That the applicant is not dependent upon,
affiliated with, or influenced by, legally or in practice, any other person,
business enterprise or organization in connection with any key elements of its
day-to-day or long-term affairs, including contracts, sales, operations,
technical affairs, equipment, facilities, supplies, employees, workforce,
consultants, subcontracts, leases, financing, income, payroll, bookkeeping,
goodwill, policies or management; and
(b) That the applicant does not rely on or
regularly utilize to perform work it contracts to perform any employee or
workforce who, while performing work for the applicant, is in the course of
employment with or under the direct control of a person, business enterprise or
organization other than the applicant, with the exception of temporary office
personnel working in the normal course of the applicant's activity(ies);
and
(c) The applicant does not rely
on or regularly utilize to perform work it contracts to perform any management
or supervisory personnel other than those persons it directly employs and
controls.
(d) An applicant shall
not be considered independent if it presents insufficient evidence of having
the capability or capacity to perform, with its own workforce, equipment,
facilities or other functional assets the work it contracts to
perform.
(e) The temporary
employment or direct control by another person, business enterprise or
organization of an applicant's employee(s) or workforce does not by itself
constitute a lack of independence if the applicant is a temporary employment
service and the temporary employment or control of the employee(s) or workforce
occurs in the normal source of the applicant's business.
(f) Any of the following conditions creates a
rebuttable presumption that the applicant is not independent:
1. one or more eligible principals is
currently an employee of a non-eligible person owned or controlled business
enterprise or organization which has a direct or indirect financial or
controlling interest in, or influence on, the applicant; or
2. one or more of the ownership, governing
body members, officers, management officials, key employees or supervisory
personnel of the applicant are substantially the same as in a non-eligible
person owned or controlled business enterprise or organization which either has
a direct or indirect financial or controlling interest in, or influence on the
applicant, or is in the same or similar industry of the applicant; or
3. the applicant is a subsidiary or affiliate
of a non-eligible person owned or controlled business enterprise or
organization; or
4. one or more
eligible principals, or the applicant, is a former employee, employer,
affiliate or subsidiary of a person, business enterprise or organization that
is in the same or related industry as the applicant and which:
a. has a direct or indirect financial or
controlling interest in, or influence on, the applicant; or
b. assisted or assists one or more eligible
principals or the applicant to obtain or utilize any of the financial or
non-financial resources the applicant uses.
5. Notwithstanding the foregoing,
participation in a formal mentor-protégé program, joint venture,
or other program designed to assist diverse businesses shall not result in
automatic failure of the test for independence.
Minority. A person who meets one or
more of the following definitions:
(a)
Indian or Indigenous Person. All persons having
origins in any of the indigenous peoples of Northern Canada, Greenland, Alaska,
and Eastern Siberia, and persons having origins in any of the indigenous
peoples of North America and who are recognized as an Indian by a tribe or
tribal organization.
(b)
Asian. All persons having origins in any of the
original peoples of the Far East, Southeast Asia, the Indian sub-continent, or
the Pacific Islands, including, but not limited to China, Japan, Korea, Samoa,
India, and the Philippine Islands.
(c)
Black. All
persons having origins in any of the Black racial groups of Africa including,
but not limited to, African-Americans, and all persons having origins of the
original peoples of the Cape Verdean Islands.
(d)
Hispanic. All
persons having their origins in any of the peoples of Latin America, including
Mexico, Puerto Rico, Cuba, Central or South America, including Brazil, or the
Caribbean Islands.
(e)
Portuguese. Portuguese persons shall only be included
in the definition of minority if specifically set forth in programs funded by
state transportation bond statutes, or other statutory authority, which include
such persons as eligible participants. Portuguese applicants are a separate
certification category from MBE.
Ongoing.
(a) In all cases, that the applicant was not
formed, reformulated, changed or reorganized solely for the purpose of taking
advantage of a special program developed to assist businesses or
non-profit-organizations owned/controlled by eligible principal(s);
and
(b) If the applicant is a
business enterprise, it means being actively in business, and owning or leasing
the resources that are typical for a business enterprise in its industry, that
ensures applicant's ability to manufacture products or provide services in the
field of requested certification without heavily relying on resources of any
other person, business enterprise or organization, and having facilities that
are appropriate for conducting a business of its type at the present stage of
its development, and regularly and actively seeking contracts, orders, or sales
of the applicant's products or services; or
(c) If the applicant is a non-profit
organization, it means regularly and actively engaging in the non-profit
activities for which it was formed.
(d) Reorganization and/or ownership changes
that render a firm potentially eligible for SDO certification, which occurred
12 months prior to certification application submittal shall create a
rebuttable presumption that the firm was restructured solely to take advantage
of certification.
(e) No applicant
shall be certified if it is currently debarred by any state, local, or federal
governmental body.
(f) Applicant
must possess any and all licenses required by Massachusetts law or regulation
for the services/products it provides.
Out-of-state Applicant. An applicant
or entity whose principal place of business is other than Massachusetts.
Owned.
(a)
1.
Corporation: one or more eligible principals of the
same certification category(ies), either individually or collectively, have
ownership of 51% or more of each type and class of outstanding stock of the
corporation, including voting stock, and 51% or more of the aggregate of all
types and classes of outstanding stock of the corporation.
2.
Partnership, Limited Liability
Company (LLC): one or more eligible principals of the same
certification category(ies), either individually or collectively, have
ownership of 51% or more of the total partnership (LLC or joint venture)
interest, including all assets, benefits, distribution rights, tax credits,
deductions and postponements, and a commensurate share of the partnership's
LLC's or joint venture's liabilities and obligations.
3.
Massachusetts Business Trust
(established under M.G.L. c. 182): one or more eligible principals
have ownership of 51% or more of transferable certifications of participation
and serve as trustee(s).
4.
Sole Proprietorship: the eligible principal has sole
ownership of all of the proprietorship assets, and being personally and solely
at risk and obligated for all of its losses and liabilities.
5.
All Businesses.
The eligible principal(s) must have the right to and actually receive the level
and kind of profit and benefits and enjoy customary incidents of ownership, if
any, that are commensurate with the level and kind of ownership reflected in
the ownership documents; the eligible principal(s) must be at risk for, and
actually incur, losses, if any, of the business enterprise in the manner and to
the extent which is commensurate with the level and kind of ownership reflected
in the ownership documents; the eligible principal's(s') ownership must be
continuing; and the certification criteria must be met in substance as well as
form. Profits, dividends, salaries, debt repayments, retained earnings and
distributions of any kind (including distributions upon liquidation) are
included among all of the indicators which may be considered.
(b) The firm's ownership by
eligible principals must be real, actual, genuine and meaningful, going beyond
"paper" ownership as reflected in ownership documents. The eligible owners must
enjoy the customary incidents of ownership, and share in the risks and profits
commensurate with their ownership interests, as demonstrated by the substance,
not merely the form.
(c) The
contribution of capital or expertise by the eligible persons to acquire their
ownership interests must be real and substantial. Debt instruments from
financial institutions or other organizations that lend funds in the normal
course of their business do not of themselves render a firm ineligible, even if
the debtor's ownership interest is security for the loan.
(d) In addition to a significant financial
investment in the firm including, but not limited to, capital, equipment,
contribution of property, space, patents, or copyrights, eligible principal's
irreplaceable expertise may be credited towards required contribution only if
it is outstanding quality, in the areas critical to the firm's operations and
indispensable to the firm's potential success. Said expertise will be
considered in light of the totality of all relevant circumstances and counted
only if accompanied by a significant financial stake and clearly documented by
the firm's records.
(e)
Contribution of capital shall not be regarded as lacking "real" and
"substantial" attributes solely because an eligible person acquired his or her
ownership interest as a result of a gift, or transfer without adequate
consideration unless there is a reason to believe that transfer in question
took place for the sole purpose of certification eligibility.
A particular thorough scrutiny to the ownership and control of
the firm in light of totality of the circumstances shall be conducted to ensure
that it is owned and controlled, in substance as well as in form, by an
eligible person as opposed to a non-eligible transferor. In addition, where an
ineligible transferor (whether or not an immediate family member) remains
involved with the firm in any capacity, the eligible principal(s) now owning
the firm must demonstrate that the transfer of ownership and/or control to the
eligible person was made for reasons other than obtaining certification.
Third-Party Certifiers. An entity,
other than the SDO, which certifies business enterprises or non-profit
organizations in one or more certification categories, or a specific industry,
and is approved by the SDO to be utilized to process an applicant's inclusion
into the SDO's listing of certified entities. The SDO's relationship with
approved Third-Party Certifiers, and its approved utilization of their
certification process, which shall be consistent with
425
CMR 2.02, shall be at the sole discretion of
the SDO.
Veteran. A person who is a veteran, as
defined in M.G.L. c. 4, § 7.
