The 2026 Appropriations Act, which became law as Session Law 2026-41 on July 7, 2026, eliminated the Office of Historically Underutilized Businesses (“the HUB Office”), repealed HUB-related statutes, and struck references to minority participation in public contracts throughout the North Carolina General Statutes. Additionally, the bill transferred administration of the North Carolina Small Business Enterprise (NCSBE) Program to the Division of Purchase & Contract within the Department of Administration.
This blog post provides a brief history of the primary North Carolina statutes and executive actions related to minority participation in public contracts and Historically Underutilized Businesses (HUBs), offers guidance to local governments about handling procurements and contracts affected by the 2026 Appropriations Act, and summarizes the NCSBE Program. Please note that this blog post uses permalinks to preserve digital links to General Statutes, Executive Orders, and other websites as they existed as of the original publication date of this blog post.
The Legislative History of HUBs in North Carolina
Over the past 37 years, North Carolina’s General Assembly and governors have taken action to encourage participation by minority businesses—later known as HUBs—in public building construction contracts. This section details some of these measures as a preface to the next section that explains the impacts of the 2026 Appropriations Act. A more complete explanation of the substantive content of the HUB-related statutes and the legal basis for programs designed to remedy discrimination can be found in this bulletin authored by former School of Government Faculty member Norma Houston.
Initial Legislation
In 1989, the General Assembly first enacted legislation, Session Law 1989-480, addressing participation by “minority businesses” in public building construction contracts over $100,000. The language, initially codified in G.S. 143-128, required local governments to adopt a verifiable percentage goal for participation by minority businesses in building construction contracts and adopt guidelines for good faith efforts applicable to both local governments and prime contractors.
Establishment of the HUB Office and HUB Advisory Council
In 1999, Governor James B. Hunt, Jr. signed Executive Order 150, which established the Office for Historically Underutilized Businesses within the Department of Administration. The HUB Office assumed responsibility for the State's existing minority business program, which had previously been administered by the Division of Purchase and Contract. This Executive Order also created the HUB Advisory Council, designed to provide support and guidance to the Governor, Department of Administration, and the HUB Office.
Codification of HUB Office and Recodification under G.S. 143-128.2
In 2001, the General Assembly formally codified the HUB Office in Session Law 2001-424. That same year, through Session Law 2001-496, the statutory language of G.S. 143-128 was expanded and recodified at G.S. 143-128.2. Since then, the language in G.S. 143-128.2 remained unchanged except for the addition of employee stock ownership plans (ESOPs) in 2023 and a later tweak to the ESOP language in 2024. The 2001 amendments created the requirements in G.S. 143-128.2 that are familiar to local governments: for building projects of $300,000 or more, local governments were to set goals for the contract, make good faith efforts, and require bidders to make good faith efforts to recruit minority participation in the contract as verified by affidavit. Separately, Session Law 2001-496 created G.S. 143-128.3, which required local governments to report data to the HUB Office.
Statewide Uniform Certification
In 2005, the General Assembly further expanded the HUB Office's responsibilities through Session Law 2005-270, which required the Secretary of Administration to develop a statewide uniform certification program for HUBs, including adopting rules for certification and creating and maintaining a database of HUBs. This legislation also created G.S. 143-128.4, which defined the term “historically underutilized business.” In 2007, Session Law 2007-392 added G.S. 143-48.4 to clarify the responsibility and authority of the Secretary of Administration for the statewide uniform certification program.
Advisory Councils Established by Governors
In 2013, Governor Pat McCrory established the Governor’s Advisory Council on Small and Historically Underutilized Businesses through Executive Order 24; this Executive Order remained in effect until September 5, 2017. In November 2017, Governor Roy Cooper created the Governor’s Advisory Council on Historically Underutilized Businesses through Executive Order 25; this Executive Order has not been rescinded.
Impacts of Repeal of HUB-Related Statutes and Elimination of the HUB Office
As noted above, the 2026 Appropriations Act that was signed into law on July 7, 2026 eliminated HUB-related statutes and the HUB Office. This section summarizes and explains the impact of the changes relevant to local governments.
Repeal of HUB Statutes, Section 22.5.(x)
Effective immediately, the 2026 Appropriations Act repealed the following statutes: G.S. 63A-19, 116D-4, 143-48.4, 143-128.2, 143-128.3, 143-128.4, and 143-131(b). The repeal of the last four statutes in the list removes the statutory basis for local governments to set goals on building projects, make good faith efforts, require bidders to make and verify good faith efforts, and report to the HUB Office.
One of the primary questions arising from these changes is how local governments must handle current procurements and existing contracts to which HUB requirements applied.
For building project contracts where work is underway, no action is necessary. Practically speaking, for single-prime contracts, the subcontractors have already been selected by the prime contractor. If the prime wants to replace a subcontractor that was a HUB, that replacement is no longer subject to good faith efforts because G.S. 143-128.2 has been repealed. Note, however, that state law still restricts whether a prime contractor can replace a subcontractor for building construction contracts. Specifically, G.S. 143-128(d) only allows a prime contractor to replace a subcontractor if the listed subcontractor's bid is later determined by the contractor to be not responsible or nonresponsive, the listed subcontractor refuses to enter into a contract for the complete performance of the bid work, or the awarding authority approves the substitution for good cause shown by the contractor.
For procurements that have been awarded where the vendor has signed the contract, but the local government has not, there is no longer statutory authority for goals and other aspects of HUB compliance. So, the local government should amend the contract to remove references to goals and compliance with HUB statutes and then reroute the contract to the vendor for signature.
For procurements that have been completed, but not yet awarded, there is no longer statutory authority for goals and other aspects of HUB compliance. Accordingly, local governments should remove references to goals and compliance with HUB statutes from contracts before execution.
For procurements in progress, statutory authority no longer exists for setting goals or requiring bidders to make good faith efforts. Thus, local governments should issue an addendum to remove HUB goals and remove requirements for bidders to list minority businesses or make and verify good faith efforts.
Repeal of Local Acts, Section 22.5.(w)
Section 22.5(w) of the 2026 Appropriations Act states “[a]ny local act authorizing a local government unit to establish, agree to, or comply with minority- or women-owned business enterprise participation requirements is hereby repealed unless compliance with such requirements is required by the federal government and its agencies in projects financed by federal grants-in-aid or loans as provided in G.S. 160A-17.1(a)(3a).”
As a reminder, a local act is legislation of the General Assembly that modifies general law and is specific to one or more local governments. You can read more about local acts here. A handful of North Carolina jurisdictions have local acts authorizing them to create Minority and Women Business Enterprise (MWBE) programs. Many of the local acts seemingly referenced by Section 22.5(w) of the 2026 Appropriations Act were passed prior to the United States Supreme Court’s 1989 decision in Richmond v. Croson and before the statewide HUB legislation took effect in 1989. This section of the 2026 Appropriations Act repeals local acts related to MWBE programs, but preserves the ability of these local governments to comply with any federally-imposed requirements for “minority business enterprise participation.” (Other local governments that did not have a local act related to MWBE programs also retain the ability to comply with the same federally-imposed requirements pursuant to G.S. 160A-17.1(a)(3).)
Local acts authorizing small business enterprise programs are not affected by the 2026 Appropriations Act.
Elimination of the HUB Office and Advisory Committees, Section 22.5(a)
Section 22.5(a) of the 2026 Appropriations Act eliminated the HUB Office and abolished any advisory committees established by the Secretary of the Department of Administration. The HUB Office is no longer operational, although the website is still active as of the original publication date of this blog post. The effect of abolishing advisory committees is less clear. The language of the 2026 Appropriations Act addresses “advisory committees established by the Secretary of the Department of Administration to develop recommendations to improve the recruitment and utilization of minority businesses.” However, as noted in the previous section detailing the history of HUBs, advisory committees have historically been created by the Governor, including the current Governor’s Advisory Council on Historically Underutilized Businesses.
Other Changes, Sections 22.5.(h) through 22.5.(m)
The 2026 Appropriations Act included other amendments that largely removed references to G.S. 143-128.2 in other sections of the General Statutes. Notably, though, the 2026 Appropriations Act did not strike the following language in the Mini-Brooks Act, G.S. 143-64.31: “Selection of a firm under this Article shall include the use of good faith efforts by the public entity to notify minority firms of the opportunity to submit qualifications for consideration by the public entity.”
Looking Ahead: Small Business Enterprises
This section explains the NCSBE Program and the 2026 Appropriations Act’s impacts on that program.
In 2020, Governor Roy Cooper issued Executive Order 143, directing the HUB Office to establish a small business enterprise program. The following year, the NCSBE Program officially launched. As stated on the Department of Administration’s website, the NCSBE Program is a race and gender-neutral program designed to provide small businesses contracting opportunities with the State of North Carolina. To become certified as a Small Business Enterprise (SBE), a business must meet all of the following criteria: be headquartered in North Carolina; be organized for profit; have 100 or fewer employees; and have annual net income of no more than $1.5 million, after deducting the cost of goods sold.
Section 22.5.(b) of the 2026 Appropriations Act transferred administration of the NCSBE Program from the HUB Office to the Division of Purchase & Contract. Additionally, other amendments in the 2026 Appropriations Act seem to signal continued, if not increased, emphasis on small businesses in public contracting. For example, Section 22.5.(g) modified G.S. 143-48(c), directing the Department of Administration to provide instructions to State agencies about SBEs. As another example, language retained in Construction Manager At Risk (CMAR) statute, G.S. 143-128.1, requires public owners to make a good faith effort to recruit and select small business entities when selecting a CMAR. However, “good faith effort” in regard to small business entities is not defined in the CMAR statute or other statutes.
While the NCSBE Program is not yet codified in the General Statutes to the extent that the HUB program was, local governments should watch for any applicable guidance from the Division of Purchase & Contract. The School of Government will continue to monitor the NCSBE Program and provide any updates relevant for local governments.
Next Steps and Questions?
The elimination of the HUB Office and repeal of the HUB statutes are significant changes for local governments in North Carolina. Local governments should coordinate closely with their legal counsel to ensure compliance with these changes, including managing ongoing procurements and existing contracts. If your unit has questions about these changes, I would be happy to discuss them with you—you can book time on my calendar using this link.
