An Austin district judge on Monday ordered the state’s Historically Underutilized Business Program rules be temporarily reinstated, meaning women- and minority-owned business owners can qualify for the state’s HUB program again for now.
Four business owners and a trade association sued the state of Texas and acting Comptroller Kelly Hancock on March 2 over the agency’s emergency rules that removed women and minorities from the HUB program and stripped their businesses of their HUB certifications. The judge ordered the reinstatement of six businesses that sued the Comptroller’s office over the emergency rules — two joined after the lawsuit was first filed — and further directs state agencies to inform HUB businesses that have been decertified since December of the court ruling.
The HUB program was created through bipartisan legislation during the 1990s to give minority- and women-owned businesses a leg up when seeking state contracts. The program does not set quotas for the the number of HUB-certified businesses, but sets goals that state agencies generally strive to meet.
The plaintiffs include Houston-based general contractors Ipsum General Contractors, LLC and Houston Construction Services; Sugarland-based medical technology distributor Mpulse Healthcare & Technology LLC; Burleson-based restoration firm Williams Professional Water Restoration Service LLC; and the greater Houston chapter of the National Association of Minority Contractors, a nonprofit trade association that represents 155 minority- and women-owned contractors.
Along with Hancock, the lawsuit also names Texas Department of Transportation Executive Director Marc Williams, Texas Health and Human Services Commission Executive Commissioner Stephanie Muth and Texas Facilities Commission Executive Director Will McKerall, whose departments all implemented Hancock’s changes to the HUB program.
Travis County district judge Amy Meachum set a trial date for the suit for Nov. 9.
The background: HUB businesses received 3,634 contracts totaling more than $4 billion in 2024, according to the Comptroller’s Office. Republicans in the state Legislature filed several bills aimed at killing the HUB program entirely last year, but legislation failed in both chambers.
In October, Hancock announced that his office would not issue new or renewed certifications while the program was being reviewed. His decision pushed the program into the national battle over government initiatives seen as those focused on “diversity, equity and inclusion.” The comptroller’s office then cited emergency powers to restructure the program in December, removing all women and minority business and limiting eligibility to only service-disabled veteran business owners.
“Businesses deserve a level playing field where government contracts are earned by performance and best value — not race or sex quotas,” Hancock, who is running in a competitive GOP primary for comptroller, wrote on social media at the time.
That change shrank the program from more than 15,000 participants to just under 500. HUB certified business owners said at the time that the change risked undercutting their business strategy and would hurt their bottom line.
State Sen. Royce West, a Dallas Democrat who co-authored the 1999 bill that codified the program into state law, said the Legislature, not the comptroller, is empowered to change the program.
“The Legislature voted. The answer was no,” West said. “The Comptroller doesn’t get to override that decision because he disagrees with it — that’s not his role under the Texas Constitution, and these business owners deserve to have that principle upheld in court.”
This is the first lawsuit challenging Hancock’s changes to the program.
Why the businesses are suing: During a news conference in Austin announcing the suit in March, the business owners said they are suing because they all lost out on government contracts after Hancock stripped their HUB certification in December.
“In this country, the legislature passes the laws, not the comptroller, and Texas is no different,” Alphonso David, president & CEO of the Global Black Economic Forum, and lead counsel for the plaintiffs, wrote in a statement. “The HUB case highlights a fundamental American principle — members of the executive branch cannot rewrite laws passed by the state legislature. They cannot deny citizens of their legal rights without a court order, legislative approval, or due process.
“Acting Comptroller Hancock took a program created by statute and rewrote it without any legal authority. His actions are baseless and unlawful and must be reversed.”
The businesses ultimately want the court to restore the program to its original form, arguing that Hancock overstepped his statutory authority, deprived them of state contracts without due process and violated the Texas Constitution.
Ruben Mercado Jr., founder of Ipsum General Contractors, said a contract he was drafting a $1 million bid for was withdrawn after Hancock restructured the program in December.
Wendell Stamley, president of the National Association of Minority Contractors, said its members in Texas have seen government contracts canceled and work they were expecting be unexpectedly returned to competitive bidding.
What state officials said: The comptroller’s office did not immediately respond to a request for comment about the injunction granted on Monday. In a statement in March, Hancock defended the changes to HUB by pointing to the 2023 U.S. Supreme Court decision that ended affirmative action in college admissions and a 2025 executive order by Gov. Greg Abbott that banned DEI policies in Texas agencies.
“Every Texas business is equally eligible to compete for state contracts, regardless of race or gender,” Hancock wrote. “Through the Centralized Master Bidders List, the primary system agencies use to notify vendors of bidding opportunities, any qualified business can register and compete. Texas will continue expanding opportunity for small businesses across our state the right way — rooted in fairness, equal treatment, and the Constitution.”
This article first appeared on The Texas Tribune.
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