Four business owners and a trade association sued the state of Texas on Monday, seeking to reverse acting Comptroller Kelly Hancock’s emergency rules altering a state program intended to give additional exposure to economically disadvantaged groups in government contracting.

During an afternoon news conference in Austin, the business owners said they are suing because they all lost out on government contracts after Hancock stripped their Historically Underutilized Business Program 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 plaintiffs are seeking a temporary injunction to block Hancock’s emergency rules, as well as reinstatement to the HUB program while the lawsuit plays out in a Travis County district court.

They are ultimately seeking a court order 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.

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.

The Comptroller’s Office could not immediately be reached for comment.

The program was created through bipartisan legislation during the 1990s, intended to give minority- and women-owned businesses a leg up when seeking state contracts. The program does not set quotas for the contracting of HUB-certified businesses, but sets goals that state agencies generally strive to meet.

HUB businesses received 3,634 contracts totaling more than $4 billion in 2024, according to the Comptroller’s Office.

Republicans filed several bills aimed at killing the HUB program entirely last year in the Legislature. They all died without making progress in either chamber.

In October, Hancock announced that his office would not issue new or renewed certifications under the program while it was reviewed, pushing the program into the national battle over government initiatives perceived to be “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.

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.

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