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STA LEGAL LOG – JULY-AUGUST 2019

New York State MWBE Program is Extended and Expanded

By Henry L. Goldberg, Legal Counsel, Subcontractors Trade Association
Partner, Moritt Hock & Hamroff LLP

On July 15, 2019, Governor Cuomo signed into law a bill extending the State’s MWBE Program, due to expire on December 31, 2019, for an additional five years (to December 31, 2024).

Article 15-A of the Executive Law authorized the Department of Economic Development

Division of Minority and Women-Owned Business Enterprises (MWBE) to promote employment and business opportunity in State contracts for minority and women-owned businesses.

In addition to extending the program for five years, the new law expands the program, based upon a 2016 Disparity Study, to ensure that the expansion would withstand constitutional requirements established by the United States Supreme Court in the City of Richmond v. J.A. Crosin Co. opinion.

The new law makes the following significant changes to the State MWBE program:

  • Increases the duration of an MWBE certification from 3 years to 5 years;
  • Increases the personal net worth ceiling from $3.5 million to $15 million. In valuation of personal net worth, the new law also maintains the exception for the value of applicant’s primary residence as well as the value of his/her interest in the MWBE itself.  The new law also increases the exemption for a qualified IRA from $500,000.00 to $750,000.00;
  • Enhances opportunities for MWBE prime contractors by establishing a new “preference” on construction projects of up to $1.4 million. If a MWBE bidding on such size project is within 10% of the low bidder, it will be deemed to be the low bidder and awarded the contract;
  • Provides the Director with enhanced authority to define “commercially useful function” for purposes of awarding credit toward minority participation;
  • Requires New York State Department of Taxation & Finance, and New York State Department of Labor, to share financial records with the Division;
  • Requires the State agency to post on its website all application waivers in whole or in part, as to minority participation goal and;
  • Creates a “Workforce Diversity Program” that requires the State agencies overseeing construction projects to insure utilization of a diverse workforce.

This last item, the creation of a Workforce Diversity Program, is a significant development that will have a burdensome impact on contractors. Under this Workforce Diversity Program (Article 28), the Director must establish “aspirational goals” for the utilization of minority group members and women, setting forth expected participation of the women and minority group members.

However, all State Invitation For Bids, Request For Proposals, or other solicitations for a State contract must set forth the expected workforce participation by distinct minority group members and women and the expected level of participation for each minority group members and women.  The following groups must all be included:

  • Black men;
  • Black women;
  • Hispanic men;
  • Hispanic women;
  • Native American men;
  • Native American women;
  • Asian men;
  • Asian women;
  • Caucasian women.

Where an IFB or RFP, or other solicitation deviates from the “aspirational goal”, the State agency (itself) must demonstrate why the aspirational goal would not be “practical, feasible or appropriate.”

Every contractor in its response to an IFB, RFP, or other solicitation must certify that it will make a good faith effort to achieve the workforce participation goal.

The certification shall also require any subcontractors to the contractor to make a good faith effort to achieve the applicable workforce participation goal in any subcontracted work.

In the event that a contractor fails to submit a certification, request or waiver, or the State agency determines that a contractor’s waiver request does not demonstrate that the applicable work force participation goal is impractical, unfeasible, or inappropriate, the State agency shall notify the contractor of the deficiency in writing and provide the contractor five business days to remedy the noticed deficiency.  A State agency may reject any bid or proposal of a contractor that fails to timely respond to a notice of deficiency or to provide documentation remedying the deficiency to the satisfaction of the State agency.

Prior to these recent changes, the Contractor was only required to show good faith efforts in achieving minority participation as it relates to two groups, namely, “women” and “minority.” With creation of the Workforce Diversity Program, under new Article 28 of the Executive Law, a Contractor will need to prove “good faith efforts” in achieving the aspirational goals for the nine separate categories cited above.  This will drastically increase the required effort on the part of contractors to either achieve the aspirational goals or to demonstrate good faith efforts were made to reach said goals.

Finally, on a positive note, the new Article 28 provides some protection for contractors as follows:

Where failure to remedy any notified deficiency in the workforce utilization plan is a ground for disqualification, that issue shall be stated in writing by the contracting state agency. The director shall establish, via regulation, rules for State contracting agencies aimed at the measurement, reduction and elimination of erroneous business disqualifications including a process affording a contractor notice and an opportunity to be heard related to such disqualifications.

Clearly, however, the political environment today militates against extensive concerns for the contracting community and towards expanded MWBE programs and more aggressive enforcement. However, you are not without rights and procedural protections, and should be sure to consult with your counsel to assure you’re fully protected at all times. Nothing less than your ability to publically contract with the State of New York is at stake.

Brian P. Craig, Of Counsel to Moritt Hock & Hamroff, LLP, assisted with the preparation of this article.