Minority Business Contracting Falls Short Under Bloomberg

Stacy Seecharan owns of B&S Iron Works in the Bronx. As part of the city's Minority- and Women-Owned Business Enterprise Program, she is one of the success stories highlighted in City Limits. However, many would hardly characterize the program as a success, but rather one that falls short of its target numbers and is ripe with contradictions. (Photo by Adi Talwar via City Limits)

Stacy Seecharan owns of B&S Iron Works in the Bronx. As part of the city’s Minority- and Women-Owned Business Enterprise Program, she is one of the success stories highlighted in City Limits. However, many would hardly characterize the program as a success, but rather one that falls short of its target numbers and is ripe with contradictions. (Photo by Adi Talwar via City Limits)

An extensive 3-part investigation by Adam Wisnieski for City Limits into the Minority & Women-Owned Business Enterprise (M/WBE) program has found the Bloomberg administration falling short of its targets. The initiative – first established under Mayor David Dinkins, abandoned by Mayor Rudolph Giuliani and restarted in Mayor Michael Bloomberg’s second term to direct a larger chunk of city contracts to businesses owned by women and people of color – appears to have inconsistent data, minimal accountability and even false reporting of working with M/WBEs.

In the first piece of the series, Wisniekski elaborates on the shortcomings:

A review of contract data, city documents and transcripts, as well as dozens of interviews with interested parties, suggests the program—admittedly a tiny piece of the city that Bloomberg will hand over to a new administration in January—was never a priority for the administration. Minority- and woman-led firms faced obstacles in qualifying for the work. And the law that created the program in 2005, as well as an amended version passed early this year, are full of contradictions and questionable numbers.

The “law” refers to Local Law 129 passed by the City Council.

The number of M/WBEs has gone from 700 in 2006 when the program started to 3,769 as of early October this year. Total numbers like these are paraded by the Bloomberg administration in press releases and speeches. Another stat:

According to the Bloomberg administration, since the law went into effect in 2006, certified companies have won more than $3 billion in contracts from the city; 877 of those certified M/WBE companies won jobs in fiscal year 2013.

However, writes Wisnieski, the administration fails to give the percentage of money going to the M/WBE companies. That’s where the lag in meeting goals becomes evident. Agencies under the mayor’s control have “fallen short of every goal established by the law for prime contracts.” An example is provided:

Where the city is doing the worst is in construction contracts for black business owners, who in 2013 were awarded 2.36 percent of prime contracts under $1 million when the goal is 12.63 percent. That gap between goal and performance was actually an improvement for black construction firms, who were awarded 0.21 percent of jobs the previous fiscal year.

When it comes to subcontracts, the numbers at first blush appear more promising for M/WBEs.

Though M/WBEs represent about 7 percent of all the vendors doing business with the city, the number of contracts won by MWBEs in fiscal year 2013 was an impressive 23 percent of all subcontracts and prime contracts covered by the program, according to the Department of Small Business Services (SBS). But since so many of those contracts are small, their share of total contract dollars—the measure that matters in the law—is puny.

In a larger context, the numbers are not impressive.

Through fiscal year 2013, M/WBE subcontractors have been awarded $1.17 billion and won a high percentage of subcontracts under $1 million in recent years—38 percent in fiscal year 2013 and 42 percent the year before.

But the available data is not broken down so it can be compared to goals established for subcontracts in the law. What’s more, the totals going to M/WBEs for each year—$109 million in fiscal year 2013 and $129 million the year before—represent a small slice of the city’s annual spending.

The SBS said it has to follow contracting laws, which limits the ability for M/WBE goals to be met: “State law requires that a majority of contracts be awarded to responsible vendors that submit the lowest responsive bids or the best proposal.”

In the second part of the investigative report, Wisnieski goes into detail about such limitations, both for the city and for businesses.

Because state law mandates that government contracts go to the lowest responsible bidder, the city cannot simply award more contracts to M/WBEs. So it has to create an environment where disadvantaged businesses can bid competitively.

This environment includes getting businesses certified – only businesses that are certified with the city count toward participation goals – and Compete to Win, a series of mentoring programs and classes advising certified business owners on winning bids. Success stories exist, such as that of Stacy Seecharan who said she benefited greatly from the programs and heads the Bronx-based B & S Iron Works, where 80 percent of its $1 million annual revenue derives from city contracts. But such is not the case across the board.

Other certified business owners interviewed said they still had problems getting city jobs because of obstacles like surety bonding (insurance that protects the customer if a contractor fails to complete a job), lack of access to capital, insurance and lack of union affiliation. Many complained the city was still not doing enough to help and that the classes are at inconvenient times far away in Manhattan.

Then there’s the matter of inconsistent data and public transparency. As per the M/WBE law, the city must conduct disparity studies. However, one such study conducted by a consulting firm and due to the SBS in early 2009 was never released. Some, including City Council members, suggested that the “mayor’s office did not like the results and therefore squashed its release.”

The Mayor’s Office of Contract Services (MOCS) said years later that it moved the studies in-house before the consulting firm finished their study. The office said its studies in 2007 and 2009 found that no changes were necessary in the target goals. The documents were never publicly released. Parts of a 2011 disparity study did make it into the public but that only generated further confusion.

More puzzling, the two versions of the 2011 disparity research—one delivered by a deputy mayor in testimony and another used by a Council committee for a report— have completely different disparity numbers for goods contracts.

The first version of the report determines there is a significant disparity in Hispanic-owned businesses getting goods contracts. The second says there is hardly a disparity at all and that 98 percent of Hispanic-owned businesses in the goods industry that want to get city work are getting it—which according to court rulings means it would be against the law for New York City to set a goal for Hispanics in the goods industry. But legislation introduced by Speaker Quinn and passed by the Council in late 2012 to update the M/WBE law—it was signed into law in early 2013—maintains the goal for Hispanic-owned businesses in goods, barely raising the original 4.99 percent goal to a flat 5 percent.

How city agencies report and track payments from prime contractors to subcontractors has been criticized, particularly in light of scandals that deprived the city of millions of dollars.

After a million-dollar fraud scheme committed by subcontractor Technodyne – described by Wisnieski as “a certified MBE responsible for milking millions from the city as part of the CityTime debacle” – was uncovered, the city created a new reporting system for subcontractors, one to replace the “lax system,” as Wisnieski puts it, which “came to light during one of the largest scandals in New York City history,” in reference to Technodyne and CityTime. The new electronic system will roll out in early 2014.

In part three of the M/WBE report, Wisnieski continues on the thread of crackdowns.

In January, the Manhattan district attorney’s office reached a $10 million deferred prosecution settlement with Siemens Electrical LLC for submitting false paperwork that overstated the work that M/WBEs had done. Earlier in 2010, Schiavone Construction settled for $20 million for related fraud.

Meanwhile, there is still no telling how many fronts or “pass-throughs” there are doing work that has been counted toward the city’s M/WBE goals. Many certified business owners interviewed think fraud is rampant. Leon Baptiste, owner of LB Electric Co., which has worked on big government projects in New York and New Jersey, says he doesn’t want to name names but he’s seen fake M/WBE companies get city work. He certified his New Jersey-based company in 2010 and says when he started to bid on New York City projects, he was surprised by the lack of monitoring. Baptiste says prime contractors are not going to follow M/WBE participation rules if agencies are not holding the companies accountable.

During his campaign, Mayor-elect Bill de Blasio gave the Bloomberg administration an “F” for its M/WBE program at a forum sponsored by City & State that asked candidates to grade it.

Only time will tell whether the M/WBE program fares any better under de Blasio’s leadership.

Read the complete investigation at City Limits.

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