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Speeches
Testimony for the City Council
Hearing on M/WBE Compliance
June 24, 2008
Thank you, Chairs James, Sears, Seabrook, and Yassky for holding this important hearing.
The city’s M/WBE program is less than three years old, but the initial results have not been impressive. Fiscal Year 2007 was the city’s first full year subject to Local Law 129 (LL 129), which establishes M/WBE participation goals for all contracts valued less than $1 million and for construction and professional service subcontracts valued less than $1 million. Unfortunately, M/WBE utilization rates for the Fiscal Year 2007 were nowhere close to these goals. For example, LL 129 mandates a goal of 12.63 percent for African Americans in the construction industry, but the utilization rate for this category was only 0.03 percent.
In Fiscal Year 2007, M/WBEs obtained only 0.6 percent of the $15.7 billion in contracts for goods and services city agencies procured. M/WBE utilization rates in the first two quarters of Fiscal Year 2008 are only slightly better than the previous year. For example, in the first half of Fiscal Year 2008, there were 21,111 micropurchase contracts awarded with a total value more than $35 million. M/WBEs obtained only 11 percent of these micropurchases, compared to 7.5 percent in the first half of Fiscal Year 2007.
In addition, according to the latest available census estimates, there were more than 600,000 M/WBEs in New York City in 2002; however, as of June 2008, there were only 1,759 M/WBEs certified by SBS—only 0.3 percent of all the M/WBEs in the city.
In 2007, my office conducted an investigation to: 1) assess how effective the SBS M/WBE program has been, 2) evaluate SBS’s M/WBE application and re-certification application process, and 3) assess the quality of information and outreach efforts by SBS about the M/WBE program.
My office found that the SBS M/WBE program is not effective in certifying M/WBEs or helping them gain more opportunities to compete for city contracts. My report concluded that firms generally perceive the program as ineffective, that the M/WBE initial and re-certification applications are difficult and time-consuming, and that the SBS website does not provide detailed information on the program to help firms determine if M/WBE certification would be beneficial to their business.
My report made the following recommendations to assist M/WBEs with the certification process:
•Create a pre-screening website to advise firms considering M/WBE certification on whether or not certifitation would be beneficial to them
•Increase the number of procurement counselors to meaningfully assist certified M/WBEs
•Streamline the initial and re-certification M/WBE applications
In April 2008, I sent Commissioner Walsh a letter asking what actions SBS had taken to increase M/WBE program awareness and decrease difficulties with the certification and re-certification application process. While I appreciate Commissioner Walsh’s prompt response, I am disappointed by his comments on the following recommendations I made in my report.
The creation of a pre-screening website
Commissioner Walsh stated that nearly 1,800 clients have attended workshops on how to sell to government and complete the M/WBE certification application. He added that “While SBS’s role is to provide businesses with as much information as possible, ultimately, the decision to certify lies with each individual business.” While I agree with this statement, I do not believe the two workshops and the current M/WBE website (www.nyc.gov/getcertified) provide business owners with nearly enough information. SBS should create a simple pre-screening website that asks each applicant to complete a simple questionnaire that determines whether or not the firm might benefit from M/WBE certification. Responses to questions regarding the goods or services the applicant provides would allow SBS to advise the applicant on whether or not the city procures these items and help determine if certification is appropriate.
Increase the number of procurement counselors
As of March 2007, there were only four procurement counselors at SBS. I find it difficult to believe that so few counselors can offer meaningful assistance to the nearly 1,800 certified M/WBEs. However, in his response to my letter, Commissioner Walsh stated that there were no immediate plans to hire additional counselors. He also stated that SBS staff members from NYC Business Solutions Centers and capacity-building programs provide firms with meaningful assistance. But capacity-building programs and NYC Business Solutions Centers do not serve the same function as procurement specialists, who according to SBS materials, help certified M/WBEs “find contract opportunities, develop competitive bids and proposals, and navigate the government’s purchasing process.” More procurement counselors are needed to meaningfully help newly certified M/WBEs locate, bid for, and win city contracts.
Streamline the initial and re-certification M/WBE applications
Commissioner Walsh stated that in the initial M/WBE certification application, SBS has eliminated the requirement for personal tax returns. However, the application form available online still requires personal tax returns. In addition, the SBS application still requires information that is not relevant to a determination of whether or not a business is a M/WBE, such as whether or not a business has a line of credit or what the depreciated value of the firm’s operating equipment is. These questions, and many others, are not a part of the applications used by 14 other cities and agencies examined in my report
There have been no recent changes to the M/WBE re-certification application. It is still essentially the same as the initial M/WBE application but with fewer documentation requirements. Compared to the 14 M/WBE re-certification applications from other cities and agencies examined by my office, the SBS re-certification application is extremely lengthy and redundant. While M/WBE re-certification applications from other cities and agencies may ask a business to provide no more than three documents, the SBS application requires 12 items, most of which firms already must provide as part of the initial M/WBE application.
A successful M/WBE program should not only benefit individual businesses by helping them meaningfully participate in the city procurement process but also increase the number of competitors for city contracts. This is in the best interest of the city.
I appreciate the opportunity to share these comments with you. I look forward to working with the Council to ensure that M/WBEs are given the opportunities to participate in the city’s procurement process.
Thank you.
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