S.7508-A / A.9508-A (Budget, Part Q)
MWBE Revisions in Article 15-A of Executive Law
March 20, 2018
The Business Council of New York State, the State’s leading business and industry trade association representing over 2,400, strongly recommends that reauthorization of Article 15-a of the Executive Law should include meaningful reforms that makes the program more flexible and workable, while supporting the policy objective of supporting minority and women-owned firms. However, we do not support the Executive Budget proposal as it fails to address basic concerns raised by contractors, and instead makes the program even more difficult to manage.
The Business Council and other business organizations have raised concerns about the ongoing implementation of the state’s MWBE contracting program, and are calling for reforms as part of any extension legislation in 2018. The program, set forth in Article 15-A of the state’s Executive Law, expires at the end of 2018. Governor Cuomo has proposed a five year extension in his Executive Budget, but instead of addressing business concerns, it proposes new and unworkable requirements on state and local government contractors. As The Business Council has consistently stated, we support New York State’s efforts to promote minority and women businesses’ participation in government contracting However, we find that there are numerous problems in both the current system and the changes being proposed in the Executive Budget.
Key concerns include the ability to obtain waivers from contract-specific MWBE participation targets, a process that our members say is slow and inconsistently applied. Likewise, many contractors have stated they were unable to obtain a rationale for the MWBE participation targets set for specific projects, despite repeated requests for such information. In response to these types of concerns, the Associated General Contractors of New York State filed numerous Freedom of Information requests with state agencies to obtain more information. When information was not forthcoming, the AGC filed Article 78 lawsuits to obtain documentation denied under FOIL requests; The Business Council joined these suits as an amicus.
In addition to a lack of transparency in the setting of contract-specific participation targets, there are major concerns regarding the data used in the state’s 2016 Disparity Study (released to the public in June of 2017). Mandated by statute, that report determined that 53% of the state’s prime construction contractors and 53.48% of construction subcontractors are MWBE firms. Since these figures appears to be significantly inflated many have also asked for the data supporting this finding. To date, the data on which the disparity study findings are based have not been released to the public. This has led to significant concerns about the accuracy of the disparity study, as well as the methodology it employed.
These questions regarding the disparity study are troubling since the legislature’s review of proposed extension and amendments of the MWBE statute are already underway, and could be finalized as early as April 1. With recommendations as to the form of the new law being based on recommendations of the 2016 study, we would expect the State-sponsored report to be as accurate as possible.
In regards to the proposals within the Executive Budget, S.7508-A / A.9508-A, Part Q, that are based on recommendations of the 2016 Disparity Study, we see the following as among the most significant issues for our members engaged in public contracting:
- The amendments remove all reference to the 2010 disparity study and replace references to them with “most recent study commissioned by” Empire State Development (ESD). This creates a situation under which any study, at any time, could be commissioned by the Director of the program rather than a set-time document upon which authoritative study will be made.
- References to state agency goals have been omitted and instead replaced by availability of MWBEs as reflected in the MWBE directory (of ESD). This replaces current statutory provisions requiring contract-specific goals set by a defined study for each contract that reflect the MWBE capacity within the area in which the contract is being let.
- Utilization plans will no longer be made public since the amendments remove the requirement that utilization plans and waivers be posted on agency websites.
- The cap on personal net worth for MWBE owners is again set at $3.5 million, however, the Director of the Division of MWBE is authorized to modify this through “rules and regulations.” The MWBE program would be extended to apply to any “state-funded entity” which is party to a state contract. This, by definition, is any local government, including but not limited to county, city, town governments and school districts. As a result, the program will cover just about every level of government within the State.
- The small business threshold of 300 employees is being eliminated in the law. Elimination of this equates to the program no longer being a small business program aimed at assisting small MWBEs. Oddly, this elimination fails to take into account federal standards - that are still referenced in the program – aimed at assisting companies with under 300 employees.
- The requirement that notification of MWBE opportunities be published in general media and trade-specific publications has been removed. The deletion of this public notice requirement weakens the program. Instead of public notices the contractors are to be invited to a pre-bid conference scheduled by the government agency awarding the contract at which time MWBEs would be present. The method for selection of the MWBEs is not clear nor does it seem to broaden the opportunity for participation. This change limits notification of opportunities, which seems contrary to maximizing MWBE notification and participation.
- The new program would give a 10% bid preference for MWBE bidders, a change that is contrary to the state’s long accepted practice of awarding contracts to the lowest, responsible bidder.
- New sections of law are added to create misdemeanors and felonies for utilizing firms that portray themselves as MWBEs but in reality are not, thus placing contracting entities at risk for the deceptive practices of others.
- The program would grant expanded powers to the Director of the Division of MWBE to conduct state agency audits and the commissioning of other studies. Additionally, the Director has great power to order reports from state-funded entities (at any government level) “as the director may require” on the status of the program.
- “Aspirational goals” as outlined in the bill require a breakdown of each trade, profession, occupation, and separate levels of participation by male and females in these categories within each minority group. The long and convoluted route that a contractor must follow to obtain workforce participation goals (WPG) within the above job classes and categories is all but unworkable. Prior to awarding a contract, the agency will require the contractor to commit to set levels of hires by gender and race/ethnicity, or obtain a waiver from certain parts of these aspirational goals, in each aspect of the project from his/her own company (as prime) down through subcontractors, materials providers, and supporting work forces. If any part of this process does not meet the WPG or if a waiver is denied, then the contractor is “noncompliant.” In a related vein, if a subcontractor fails to make WPG the contractor must “identify” the sub to the contracting agency who will likely deem that sub “noncompliant.” Noncompliance will lead to ineligibility to participate on future state contracts.
Generally, the Executive Budget proposal for a new iterations of Executive Law Article 15-A will created new and significant issues for contractors. Rather than concentrating on improving the current system and insuring the timely designations and re-authorizations of state certified MWBE companies and their entry into the universe of state contracting, the law increases the arbitrary power of the director of the program while complicating the reporting systems required of contractors.
Further, the entire issue of increasing the levels of MWBE participation in the workforce through targeted workforce development and apprenticeship programs is ignored. In that vein, access to capital, bonding, and other business development tools needed by fledgling MWBEs are not addressed.
For the reason outlined above, The Business Council opposes the inclusion of these provisions in the State Budget and will advocate for meaningful reform rather than authorization of 15-A that will cripple the New York State bidding and contracting process.