In the tri-state area, New York and New York City offer the most comprehensive programs for MWBEs. For example, certified minority and woman owned businesses have acess to training and other resources, bonding opportunities and a number of sponsored loans and grants. Further, the State of New York has the most aggressive MWBE participation goals of any state in the nation currently at 30 percent. But according to many in the construction industry, that goal is a bar set too high — an impediment to prime contracotrs that does little to improve access to large government projects by MWBEs.
At issue, according to a 2017 study by the Georgia-based research group EQuant, is not the number of certified MWBEs. Rather, it is a shortage of certified MWBEs with the capacity to complete contracts in the industry sectors where contract opportunities exist. For example, in New York City (which has the same MWBE participation goals as the state), only six of 249 MWBEs certified to do heavy construction on streets, buildings and sewers had the capacity to perform contracts in excess of $27 million last year. Yet heavy construction is an industry sector where large contracts abound. By contrast, NYC has many MWBEs with the capacity to perform smaller contracts, such as those in Special Trades and Electrical and Plumbing sectors, where demand is much smaller. And even in those sectors, as the contract amounts get larger, the number of certified MWBEs who can meet capacity requirements falls off.
The shortfall is even more dramatic in rural parts of the state. For instance, when SUNY Canton was preparing to do a $327,000 upgrade to its cyber cafe, it searched for certified MWBEs with the capacity to do the job. It found no certified minority firms and a only a few women-owned firms. Nevertheless, to meet state regulatory requirements, it had to bid out the job with the 30 percent participation goal before applying for a waiver from the state. And that waiver process consumes time and resources that construction industry experts complain could be put to better use.
Construction Industry Balks
Last year, the construction trade group Associated General Contractors of New York State filed a lawsuit against the state to obtain records showing how MWBE participation goals are established on individual projects, which AGC says is required by law. (The Cuomo administration disagrees.) The lawsuit highlighted the longstanding issue plaguing prime contractors throughout the state — what they see as arbitrary and unreachable MWBE participation goals. According to Mike Elmendorf, the president and CEO of AGC, the industry shares the overarching goal of increasing MWBE participation in government contracts but objects to the state’s implementation of the law. “You end up with MWBE goals on projects which cannot be achieved because they are not based on reality or the law,” Elmendorf said in an interview with City & State NY. “Contractors and agencies are spending a lot of time trying to achieve a goal that wasn’t properly established in the first place.”
But many lawmakers who monitor MWBE participation in government contracts disagree. In fact, the chair of the Oversight of Minority and Women-Owned Business Enterprise Subcommitte, Assemblywoman Rodneyse Bichotte, thinks the goal should be closer to 40 percent based on the most recent disparity report. New York State Sen. James Sanders, Jr., while falling short of calling for cumping up the goal, said he believes higher goals have helped increase participation by MWBEs. “There’s a saying that if you aim at nothing, you usually hit it,” he said.
A Better Way?
Still, there’s no doubt that the number of MWBEs with the capacity to meet larger contacts, particuarly in heavy, commercial and industrial construction sectors, is insufficient to meet demand. Equant’s numbers clearly bear that out. But the issue of how to bring those numbers closer to the aspirational goal set by Gov. Cuomo and state lawmakers is still unresolved.
One obvious approach, according to EQuant CEO Thomas “Danny” Boston, Ph.D., is for the state to better understand the capacity of its existing MWBEs. Doing so, he explains, would give MWBE officials the ability to target assistance to MWBEs who operate in sectors where a capacity gap exists. Further, the information would increase the effectiveness of the MWBE program by increasing the transparency of “good faith efforts” and reducing the risk to prime contractors who are required to utilize MWBEs.
Additionally, Boston suggests, the state should continue to expand its efforts to help MWBEs build capacity by expanding access to bonding opportunities, insurance and working capital.
The Carmoon Group Ltd. is a full service insurance broker that specializes in providing high quality risk management and financial planning assistance to MWBEs. Our professional staff has over 20 years of experience working with small, medium and large businesses across a wide range of industries, and we are standing by now to help you reach your goals. Give us a call today to set up an appointment for your initial consultation. Or, if you’re too busy to call, just reach out online and we’ll get back to you at a convenient time.