Minority- and Women-Owned Businesses Sue Texas Comptroller over Contracting Program’s Conversion + Cancellation
Takeaways
- Texas small businesses owned by economically disadvantaged individuals allege that the comptroller’s 12.02.25 emergency regulation stripped them of Historically Underutilized Business (HUB) certifications and benefits in violation of statutory requirements.
- More than 15,000 HUB-certified minority- and women-owned businesses were decertified, creating barriers to competing for state contracts.
- The plaintiffs seek declaratory and injunctive relief to void the emergency rule, reinstate HUB certifications and require state agencies to follow statutory requirements.
Related links
- Ipsum General Contractors v. Hancock Complaint
- Historically Underutilized Business Certification Process Suspended by Acting Texas Comptroller (10.28.25 press release)
- Acting Texas Comptroller Kelly Hancock Announces Emergency Rules for Revamped VetHUB Program (12.02.25 press release)
- Texas Government Code § 2161. Historically Underutilized Businesses (The HUB Act)
- Texas’ Suspension of ‘Historically Underutilized Business’ Certifications Impacts State Contracting Processes
Article
Four minority- and women-owned Texas small businesses and a minority contractor trade association filed suit against Acting Texas Comptroller of Public Accounts Kelly Hancock on March 2, 2026, alleging that the comptroller unlawfully dismantled the state’s Historically Underutilized Business (HUB) Program through emergency rulemaking.
The plaintiffs allege the comptroller exceeded his authority by violating the plain text and purpose of the HUB Act, circumventing the Texas Administrative Procedure Act’s required public-participation procedures, and violating protections of due process, equal protection, and separation of powers under the Texas Constitution.
Pursuant to the emergency action, the comptroller decertified more than 15,000 businesses owned by economically disadvantaged individuals of their HUB certification, leaving only about 500 certified HUBs, which the plaintiffs alleged are all owned by White men. The decertification jeopardizes millions of dollars in HUB-related contracts.
The HUB Program
Texas created the HUB program in the 1990s to “promote full and equal business opportunities for all businesses in an effort to remedy disparity in state procurement and contracting.” (34 Tex. Admin. Code § 20.281.) A business qualifies as a HUB if it is at least 51% owned by a person (1) who is “economically disadvantaged because of the person’s identification as a member of a certain group,” which include “Black Americans, Hispanic Americans, women, Asian Pacific Americans, Native Americans, and veterans … who have suffered at least a 20 percent service-connected disability,” and (2) who “has suffered the effects of discriminatory practices or other similar insidious circumstances over which the person has no control.” (Tex. Gov’t Code § 2161.001.)
The law requires Texas agencies to adopt and make “good faith” efforts to meet statewide and agency-specific HUB Utilization Goals. (Tex. Admin. Code § 20.284(a)-(c).) The goals are not quotas, nor do they provide bidding preferences. In addition to the nonbinding goals, state agencies are directed to encourage utilization of HUB businesses by, among other things, providing procurement assistance, maintaining databases of certified HUB businesses, offering mentorship, and encouraging subcontracting opportunities for historically marginalized groups. (Tex. Gov’t Code § 2161.062.)
Comptroller First Suspends, Then Converts Program to Support Only Service-Disabled Veterans
On Oct. 28, 2025, the comptroller announced a “freeze on the issuance of new and renewed HUB certifications for state procurement,” pending further review of the program’s constitutionality. The comptroller issued guidance referencing recent U.S. Supreme Court rulings and a gubernatorial order, Executive Order GA-55, promoting “color-blind” governmental action.
On Dec. 2, 2025, the comptroller issued an emergency regulation converting the HUB Program into a “VetHUB” (Veteran Heroes United in Business), a program serving only businesses owned by veterans with at least a 20% service-connected disability. Comptroller Hancock said the program would no longer benefit minority- and women-owned businesses.
He justified the emergency regulation as necessary to comply with constitutional principles, stating that VetHUB would “ensure Texas’ state contracting is free from gender or race discrimination” and simplify processes for disabled veterans.
On Jan. 6, 2026, the comptroller canceled all HUBs owned by minorities and women, notifying only some affected businesses by email.
The plaintiffs argue the comptroller’s justifications for the emergency regulation are pretextual, legally unfounded, and improperly wield legislative and judicial authority. The plaintiffs point out that, in 2025, the Texas legislature expressly rejected a bill that sought to restrict HUB eligibility solely to businesses owned by disabled veterans. They also argue that the comptroller bypassed mandatory 30-day notice-and-comment rulemaking procedures.
According to the plaintiffs, the three agencies with the largest proportion of HUB-related contracts — Texas Department of Transportation, the Texas Health and Human Services Commission, and the Texas Facilities Commission — have ceased complying with statutory HUB requirements, threatening millions of dollars of contracting opportunities.
Relief Requested
The plaintiffs request the following relief from the court:
- A declaration that the emergency rule is void and unenforceable.
- Temporary and permanent injunctions to prohibit the comptroller and other state officials from enforcing the emergency rule and denying HUB benefits.
- Reinstatement of HUB certifications and formal notice of the rule’s invalidity.
- An order compelling agencies to comply with the HUB Act.
- Attorneys’ fees and costs and any additional relief the court deems appropriate.
The lawsuit reflects a growing trend toward state and local governments scaling back programs that support businesses owned by minorities, women, and socially and economically disadvantaged individuals.
* * *
Jackson Lewis attorneys are closely monitoring these developments and are available to assist with any concerns. Please contact us with any questions.
(Law Graduate Nina Bundy contributed to this article.)
© Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.
Focused on employment and labor law since 1958, Jackson Lewis P.C.’s 1,100+ attorneys located in major cities nationwide consistently identify and respond to new ways workplace law intersects business. We help employers develop proactive strategies, strong policies and business-oriented solutions to cultivate high-functioning workforces that are engaged and stable, and share our clients’ goals to emphasize belonging and respect for the contributions of every employee. For more information, visit https://www.jacksonlewis.com.