In response to the November 28, 2017 OpEd as pertains to MWBE Contracting.
This area of public administration is a sticky one. As with most commentary on MWBEs relates, the assertions in that opinion focus mainly on the construction realm. Since my Master’s thesis focused explicitly on MWBE contracting, and I happen to be currently working in that space, gather ‘round while I elucidate.
The Construction industry is, admittedly, interesting, however, it definitely does not represent 100% of the state certified firms. Drawing from the previous OpEd, the complaint is that there are too few of the certified MWBEs across New York State can handle heavy construction contracts above $27–30 Million. This belittles the point that there are — according to NYSESD’s database — 2,339 MWBE certified firms in Construction. That is to say nothing of the nearly 10,000 firms overall from as many sectors as exist in New York. Contracting targets in these areas are as essential if not more than in construction since government can, in its role as economic driver, spur growth in these smaller entrepreneurial firms versus allowing the entire bulk of contracting money be absorbed by gargantuan category specific players.
Targeting is the first critical step in ensuring smaller entities gain sufficient experience and capacity to reach the Holy Grail of contract objectives: the enterprise level client. The previous commentor’s frustration is understandable, targeting is almost always seen as unfair and unreachable. However, per ESD’s own reporting: 1,081 requests for MWBE waivers were received in FY2016–17. A full 928 were denied, meaning, the MWBE community was sufficient and robust enough to meet the requirement, it was instead the contractor who had not made “good faith efforts” to reach them. Additionally, 27 violations for breech of contract related to MWBE concerns resulted in approximately $1.4 Mn in imposed damages from violations. $51,306.03 per contract, or, the annual salary of one FTE per violation. That is in and of itself a business case to do better research. Without targeting, fewer contract dollars reach these nimbler, innovative, more price competitive firms.
Smaller firms do frequently have an issue with capacity. Again, from my research, there is a limiting factor of firms’ ability to secure bonding above a certain threshold which is generally the make or break point for seeking higher dollar value contracts. When I was working in Washington DC Municipal Government, I designed the curriculum for a business mentorship program which included support for bonding requirements. In New York, several public entities currently do this: MTA, NYCEDC, NYSESD, for example. But, it begs greater dispersion, inspiring widespread effects in MWBEs reaching higher, growing their capacity, and becoming increasingly useful to larger firms. A variety of private entities operate internal business mentorship programs, and they ought to be applauded and their methods emulated.
Joint Venture formation also improves MWBE standing. This technique is not given appropriate attention in my opinion and is highly effective. Two entities each worth $15 Mn in capacity, unified, can aim at a contract valued at $30Mn. NYC SBS, and SBA via their PTACs (frequently promoted by US Representative Joe Crowley,) and NYCEDC have programs to help advise, bring together, and facilitate JV formation.
These techniques are not optional. The yawning chasm between strategy and execution here is implementation. While these programs, educational experiences, and methods are available for utilization, they have to be accessed by the MWBE community where they are, not just at agency headquarters. Clearly, the state maintains robust evaluation and metrics for the target. Department budgets already dedicate funding and personnel for these initiatives, additional funding could be organized by leveraging existing public-private partnerships, as well as engaging new ones; this sector’s growth lacks not a business case (beyond the FTE I mentioned earlier.)
Lastly, closure of the strategy-execution gap represents a political feather in Governor Cuomo’s cap: resisting the wealth transfer tax strategy recently passed at the Federal level by protecting the little guy. In contrast, to suggest that these targets ought to be eliminated lands the proposer squarely in the camp of those aiming to hasten and accelerate the polemic. Truthfully, there is no reason why the targets should not exist. In FY2016–2017, NYS reached 27% participation. Still 3% behind, but closer to the goal than the previous opiner’s dire predictions. Their issue is not with the objective, but rather executing what is necessary to ensure viability and progress of MWBEs in NYS. To quote the old saying: “If one could do charity without money, and favors without aggravation, the world would be full of saints.”