GOP: Fix Issues In MWBE Program
Last week, Gov. Andrew Cuomo signed legislation expanding and extending the state’s Minority and Women Owned Business Enterprises program.
Some legislators, however, have concerns that the program isn’t working as it should.
The legislation increases agency and authority discretionary purchasing threshold to $500,000; increases the personal net worth to $15 million and provides the director of the Department of Economic Development’s Division of Minority and Women-owned Business Enterprises the authority to set the personal net worth requirement for MWBE certification via regulation while excluding holding companies from the net worth calculation; creates a workforce program; with goals for minority group members and women; establishes bidding credits for MWBE prime contractors on low-bid construction projects of up to $1.4 million and increases the size ‘of procurements that can include bidding credits each year with inflation that allows MWBE businesses to exceed the low bid by 10 percent and still get a state contract; expands the authority of the Statewide Advocate to audit agencies and investigate complaints from MWBEs; requires all contracting state agencies to develop a four-year plan to promote and increase MWBE participation on state contracts and sub-contracts.
“The extension and expansion of New York’s nation-leading MWBE program will help ensure our economy is reflective of our values and of our diverse talent pool,” Cuomo said in a news release. “Diversity is New York’s greatest asset, and by signing this measure into law we will empower more women and people of color to participate in state contracts and continue our aggressive program to make contracting even more inclusive.”
CAN FEMALE-OWNED BUSINESS BE CERTIFIED?
Assemblyman Andrew Goodell, R-Jamestown, said one of the issues he has with the program is that it is too difficult for businesses to get certified in the first place. He cited one local company that is owned by a woman whose husband is her director of sales. That business has been unable to get certified as a MWBE and thus is not in the running for state contracts through the MWBE program.
“I appreciate the thrust of this bill, which is to expedite reviews of MWBE applications and to streamline the process, both of which I find very helpful and I support the concept,” Goodell said. “I would just share with you that I am extraordinarily frustrated with the MWBE process in New York state.
“I have received more phone calls from women-owned businesses who have been denied MWBE status for what appears to be openly sexist view of the MWBE administrators who apparently consider it their mission to keep anyone out of the program unless they meet extraordinarily high standards. And so I have a manufacturer in my community who applies for MWBE. The wife runs the company The husband is the director of sales. She is on the plant floor. She knows what’s going on. She signed all of the documents. She runs the company in every way but because her husband is involved, there is apparently some unwritten presumption that she’s not running the program. And I have another one that just came in the other day. It’s a wife and husband team, she runs the company in every respect — the bids, the contracts, everything. Her husband works for her. They start out with this presumption that if it’s a husband and wife team it’s can’t possibly be MWBE. And that is absolutely baloney. So what’s this bill do? It speeds up the denial process without addressing the fact that this MWBE program is not fairly and appropriately evaluating these applications.”
Goodell wasn’t the only Assembly member to levy such concerns. Assemblywoman Mary Beth Walsh, R-Ballston, spoke on the Assembly floor about a business owner in her district whose father and two brothers started a business. The woman took the business over with her brother five years or so ago with the brother acting as a silent partner and the woman owning 51 percent of the business. Being certified as a MWBE business would have allowed the business to remain competitive in her industry, which Walsh said is male-dominated. Walsh also voted against the legislation.
“She had her application, it took over two years and she was ultimately denied,” Walsh said. “I see in this bill that one of the goals of this bill is to reduce the MWBE certification timeline from 60 days to 45 days once a completed application is submitted. I think one of the big problems is that it was like death by 1,000 paper cuts. The application was never quite completed. They kept coming back and coming back and another delay and then coming back for more paperwork and then back for more paperwork. She was trying, of course, to run the business at the same time. She would have really benefited from this certification. She in good faith tried to go through the process but you know, it became very discouraging for her because the last name of the business, the name of the company, was brothers, and she felt like the people that were evaluating this never considered her seriously because it said brothers. As Assemblyman Goodell said earlier, sometimes there is an assumption that if you’re in a male-dominated business and have a partner who happens to be male, you can’t possibly by the one doing the work.”
MWBE PROGRAM GOALS
The state’s MWBE program is housed under Article 15-A of the Executive Law, which authorizes the Department of Economic Development’s Division of Minority and Women-owned Business Enterprises to promote employment and business opportunities on state contracts for minorities and women-owned businesses. State agencies and authorities are charged with establishing business participation goals for minorities and women, with 30 percent of state contracts designated for minority or woman-owned businesses. The justification for that number came from a 2016 Disparity Study conducted to ensure that the MWBE program continues to meet the constitutional requirements established by the United States Supreme Court in City of Richmond v. J.A. Croson Co. in 1989 in which the court ruled set-aside programs could not be based on past actions but are allowed if there is evidence minorities or women are not receiving equal access to state contracts. The Diversity Study, according to supporters, showed minority and women-owned businesses weren’t receiving their fair share of state contracts.
“I want to make sure we understand the impact that is happening within this bill and the transformation opportunity that does exist because of it,” said Assemblyman Michael Blake, D-Bronx. “Too many times minority, women-owned businesses in New York state are not having the chance to grow and expand, in large part due to lack of access to capital, lack of access to contracting and moreover lack of access to opportunity. Too many times you’re not able to become a minority, woman-owned enterprise because of lack of net worth, a threshold that has been unfairly placed upon minority and women-owned businesses for years. Raising it to $15 million as well as making sure the regulation, you have a chance to go higher by industry, is a game-changer for so many minority, women-owned businesses who otherwise would not be able to become MWBEs in New York state. When you think about the opportunities when it comes to workforce goals that we’re to put in place. Too often we’re talking about the need and desire for diversity, but diversity is not able to happen without a plan and without accountability. The opportunity for discretionary spending, for it to go up to $500,000, is also critical. Too often we are not giving the contracting opportunities for these black and brown businesses and women-owned businesses that have been waiting for years, if not decades.”
ASPIRATIONAL GOALS AND WAIVERS
While a figure of 30 percent participation by minorities and women in state contracts was discussed by legislators during debate, the aspirational goals for participation will vary depending on the industry involved for the following categories: black men, black women, Hispanic men, Hispanic women, Native American men, Native American women, Asian men, Asian women and Caucasian women.
It is possible for contractors to receive a waiver if the aspirational goal of 30 percent of a contract going to minority or women-owned businesses can’t be met if contractors can document numerical evidence showing applying the aspirational goal isn’t practical, feasible or appropriate, document the contractor’s efforts to promote inclusion for minority group members and women in the project; show the level of anticipated participation by minority group members and women required in the contract; a list of all subcontractors anticipated to work on the project and level of anticipated participation by minority group members and women; and any other relevant information. Contractors also have to agree to make a good-faith effort to achieve the workforce participation goals and contractually require subcontractors to make similar good-faith efforts.
Assemblyman Christopher Friend, R-Big Flats, questioned Assemblywoman Rodneyse Bichotte, D-Kings County, about the 30 percent aspirational goal and the waiver process. Friend said 93.6 percent of waivers for the MWBE program were granted in 2017-18 while wondering if the 30% goal is attainable in every economic development region of the state.
“There will be new goals created based on the disparity study and also we will be publicizing the waivers,” Bichotte said. “So it would give us a more transparency in terms of what basis the waivers were given and when we take all that information we can certainly improve the process. On our side, the minority and women side, there have been complaints that too many waivers have been given. On one side, I’m sure the prime contractors are saying ‘Hey, you’re not giving enough.’ For us, we feel there are too many of these waivers that are given. So again, now that we’re going to put it in statute, the process should be more transparent. We’ll be able to collect the data and move forward in terms of how we want to progress in our process.”
Friend said he has also heard complaints from his district about businesses not being able to become certified for the MWBE program and from companies that aren’t able to bid on state contracts because they can’t meet the 30% aspirational goal for participation by women and minority owned businesses. Walsh gave a similar statement.
“But one thing everybody in my district, overwhelmingly has an issue with, is the 30 percent utilization rate,” Friend said. “Whether it’s a private business or a public business, whether it’s the unions and nonunions, everybody has been coming to me. No matter what, there’s been some kind of workaround to find some way to have an MWBE come in and push paperwork and not actually be learning any skills to be able to develop their business in the long run. For that reason I’m not going to be able to support this because that is the underlying goal. It would have been great to see something in this bill that would have said we’re going to follow the Regional Economic Development Plans. We have 10 of them in the state, Whatever your MWBE participation is for the year, we’re going to go ahead with that and let that be your participation goal and let the governor know we’re not sticking by that 30 percent for a one-size-fits-all.”
A FINAL COMPLAINT
Goodell also took issue with the stipulation in the MWBE extension and expansion that establishes bidding credits for MWBE prime contractors on low-bid construction projects of up to $1.4 million and increases the size ‘of procurements that can include bidding credits each year with inflation that allows MWBE businesses to exceed the low bid by 10 percent and still get a state contract.
“The second thing I have heartburn with is that it increases the credits to MWBE so they can be considered the lowest responsible bidder even if they’re 10% higher than everybody else,” Goodell said. “If we’re all focusing on the best interests of the taxpayer, we should require that we go with the lowest responsible bid.”
Goodell called on Cuomo to intervent and instruct those certifying MWBE businesses to remove the presumption that a company with any male participation should be rejected from the program.
“That’s baloney. It’s an erroneous assumption,” Goodell said. “It should be rejected. At the same time, I don’t think we should say if you are one of those fortunate very few companies that makes it through the process, that the world is yours. We want to recognize MWBEs, we want to encourage them, we want to mentor them, we want to develop them. But at the same time we shouldn’t say you can quote 10% higher than anyone else and still get the project. I’m torn on this bill because I appreciate the efforts to streamline it. I’m compelled to vote no because those efforts will be unsuccessful until we have an MBWE certification process that recognizes the husband and wife teams can have a company that is run by the wife and is a legitimate MWBE.”