Relates to expanding opportunities for women and minority-owned business enterprises and increasing competition and diversity in procurements by the state and its pu

Summary of provisions

Section 1 of the bill would set forth legislative findings.

Section 1-a of the bill would set forth the title of the law.

Section 2 of the bill would amend Executive Law § 310 to add definitions of "lessee," "personal net worth," "small business, "the 2010 disparity study," and "diversity practices," and amends the definitions of "minority-owned business enterprise" and "women-owned business enterprise" to restrict them to small businesses and to limit their ownership to individuals whose net worth does not exceed a certain amount.

Section 3 of the bill would add a new Executive Law § 4-a to create the position of Chief Diversity Officer for the State and define the responsibilities of such officer.

Section 3-a of the bill would amend State Finance Law § 161(1)(a) to add the Chief Diversity Officer to the New York State Procurement Council.

Section 4 of the bill would amend Executive Law § 312-a to recommission a statewide disparity study to be delivered to the Governor and Legislature by February 15, 2016, and to include in that disparity study a review of contractor employment and management practices in regard to qualified minorities and women.

Section 5 of the bill would amend Executive Law § 313 to:

* Set statewide goals for contracting with certified MWBEs based on the calculations of the 2010 Disparity Study, which the State will attempt to meet;

* Require the Director ("Director") of the Division of Minority and Women's Business Development ("DMWBD") to provide state agencies with the 2010 Disparity Study;

* Require agencies to establish agency-specific goals for contracting with certified MWBEs based on the 2010 disparity study;

* Provide for the promulgation of regulations by the Director to, among other things: (a) establish measures and procedures to ensure maximum feasible participation by MWBEs in state contracting; (b) provide for certification and decertification of MWBEs; (c) require contract solicitations to state the expected degree of MWBE participation; (d) require agencies to provide a list of certified MWBEs to prospective contractors; (e) allow certified MWBEs to use their own work as contractors to meet subcontractor goals; (f) provide for joint ventures that bidders may count towards MWBE participation; (g) provide for circumstances under which a contractor may waive obligations to subcontract with MWBEs; (g) require that agencies verify MWBE participation; (h) provide for collection of statistical data concerning MWBE participation; and (i) require agencies to consult the 2010 disparity study when setting agency-specific goals.

* Define state contracts, solely for purposes of MWBE participation, to include leases of real property where the terms of such leases provide for construction, demolition, replacement, or major repair or renovation of such proper1y exceeding $100,000; and

* Require agencies to engage in good faith efforts to meet the goals they have adopted pursuant to Executive Law Article 15-A and the Director's regulations.

Section 6 of the bill would amend the Executive Law to add a new section 313-a to require the Director to promulgate regulations requiring state agencies to assess the diversity practices of contractors submitting bids or proposals in connection with the award of a State contract where practicable, feasible and appropriate. These regulations are required to be adopted in consultation with the State Procurement Council established pursuant to Executive Law § 161.

Section 7 of the bill would amend Executive Law § 315 to require enhanced reporting by state entities regarding their compliance with the provisions of Article IS-A, and the submission of an annual report by the Director assessing the effectiveness of each State entity's MWBE program. Section 7 of the bill would also require that agencies that substantially fail to meet their agency-specific goals must submit to the Director a remedial action plan. Where the Director finds that an agency has failed within one year to act in good faith to implement the remedial action plan, the Director would direct additional remedial measures as follows:

* Assurance that the agency is making sufficient and effective efforts to solicit MWBEs;

* Division of contract requirements when economically feasible;

* Elimination of extended capitalization and experience requirements when programmatically and economically feasible;

* Identification of particular contracts as particularly appropriate for MWBEs; and

* Upon a finding by the Director that an agency has failed to take affirmative measures to follow the remedial actions set forth by the director and in the absence of objective progress towards the agency's goals, require some or all of the agency's procurement to be placed under the direction or control of another agency or agencies for a specified period of time.

Section 8 of the bill would amend Executive Law § 314(2-a) to revise the procedures under which the Director certifies MWBEs for New York municipalities to add a cap on personal net worth of $3.5 million adjusted for inflation, and to require that an MWBE be a small business.

Section 9 of the bill would amend Executive Law § 316 to enhance the penalties for contractors that willfully or intentionally disregard their responsibilities to utilize MWBE firms. Such enhanced penalties include debarment of contractors from submitting bids to any contracting agency for a period of up to one year, or up to five years if a second violation occurs within a five-year period. Section 9 would also amend the dispute resolution procedures of Article 15-A to require complaints to be heard by a hearing officer of the DMWBD rather than an outside arbitrator.

Section 10 of the bill would amend the Executive Law to add a new section 316-a to require State agencies to include a provision in their contracts that would permit them to assess liquidated or other appropriate damages against a contractor for failure to comply with the MWBE requirements.

Section 11 of the bill would provide a severability clause.

Section 12 of the bill would authorize and direct the State Financial System to assist the Director in the implementation of this Act.

Section 13 of the bill would amend the opening paragraph of subdivision (h) of section 121 of Chapter 261 of the Laws of 1988 to move the date on which Article 15-E of the Executive Law is deemed repealed from December 31, 2018 to December 31, 2016.

Section 14 of the bill would provide that this legislation take effect 90 days after it becomes law, but further provides that the Director shall commence rulemaking procedures immediately upon enactment.

Justification

In 2006, the Empire State Development Corporation commissioned a disparity study to evaluate whether minority and women-owned businesses had a full and" fair opportunity to participate in state contracting. The results of that study were published on April 29, 2010, under the title "The State of Minority and Women-Owned Business Enterprises: Evidence from New York." The report found evidence of statistically significant disparities between participation of MWBEs in the New York market and the availability of such businesses. It

concluded that these disparities could not be explained by factors untainted 'by discrimination.

This legislation is one of three bills that seek to address the findings of the disparity study, to remedy the results of past discrimination and to provide MWBEs with a full and fair opportunity to compete for contracting opportunities in New York State. The legislation also addresses recommendations of the task force created by Governor Paterson under Executive Order No. 10 to increase the utilization of minority and woman-owned business enterprise underwriters for State debt offerings ("MWBE Task Force"). The MWBE Task Force, which issued its final report on March 24, 2010, also considered other sectors of professional services (legal, banking, financial brokerage and insurance) and made recommendations regarding the procurement of these services to level the playing field and to help ensure that firms in these sectors were given fair and adequate opportunity to participate in State business. As part of its report, the Task Force recommended that legislation be enacted to increase accountability on the part of State agencies and public authorities regarding their compliance with existing provisions of law pertaining to participation by MWBEs and to promote the State's utilization of MWBE and non-MWBE firms that have sound diversity practices.

Although New York State currently has laws that address procurement from MWBEs and, while such laws have continued to evolve since 1973 when the New York State Office of Minority Business Enterprise was first established, those laws have not been sufficiently effective because of the lack of adequate oversight, reporting and accountability by State entities. Therefore, this legislation seeks to provide a framework so that State agencies and public authorities can be held accountable for their commitment to MWBE participation and diversity in the area of procurement. Specifically, it would provide for agency-specific goals based on the disparity study; establish a road map for agency efforts to meet those goals, including the adoption of remedial plans for substantial failure to do so; grant the Director various tools to alter agency contracting practices when there is a lack of good faith efforts to implement the remedial plan; create a new process for resolution of disputes; and impose new sanctions for bad faith actions by contractors.

Finally, the legislation would adopt several measures to focus Article 15-A on the goal of remedying the discrimination set forth in the disparity study, by assisting those businesses that have been historically excluded. In particular, it would impose a net worth cap on the ownership of certified MWBEs, require that such certification l;>e limited to small businesses, provide that Article 15-A sunset in December 2016, two years earlier than under current law, and authorize a new disparity study to determine the status of the market and any evidence of continuing discrimination at the time the statute comes up for reauthorization.

This legislation, and the two companion bills submitted with it, will strengthen existing tools to promote participation by MWBE firms in state contracts and the utilization of contractors, suppliers and consultants with sound diversity practices. Furthermore, the legislation will help keep the State and its constituent entities accountable for their actions in this regard. In sum, it will create a

process for remedying the past discrimination uncovered by the 2010 Disparity Study, and establish equal opportunity for all businesses in New York.

Existing law

Executive Law Article 15-A sets forth the current MWBE program in state contracting.

Legislative history

This is a new bill.

Fiscal implications

This bill would have no material fiscal impact on the State or localities. It would heighten various responsibilities of State agencies and the DMWBD, but such responsibilities would be addressed through existing resources.

Effective date

This bill would take effect 90 days after it becomes law, provided that the Director may commence rulemaking procedures immediately upon enactment.