Thursday, December 17, 2015
Government Contracting Equity: Laws and Policies versus Nassau County Practices
Government Contracting Equity: Laws and Policies versus Nassau County Practices By Charlene J. Thompson, Esq. Government contracting can be a sustaining source of income for businesses large and small. The underlying premise for those seeking government contracts is that the process is supposed to be fair and equitable for all having the requisite skill set and capacity to deliver those goods and/or services being sought by the government entity. Historically, in Nassau County, many government contracting opportunities have been awarded to a select few whom have established themselves as contractors of choice for the municipalities and agencies they service. These prime servicers have often aligned themselves with the reigning political party in expectation that in doing so, more contracting opportunities would be steered towards them. Although written policies have always supported a fair, open and equitable process, the practice has more often been that Requests for Proposals and/or Bids are tailored to the qualifications and specifications of a particular firm or business that the municipality has already identified for the contract. The solicitation typically has a short response time and is merely a formality designed to meet the minimal procurement process qualifications to justify the engagement of the selected contractor. Additionally, there are a significant number of contracts issued that fall below the threshold requiring a public solicitation process, creating another “inside track” for the select few.. The adage that “[i]t’s not what you know, it’s who you know,” rings true when it comes to government contracting in Nassau County. These widely accepted practices have historically led to the exclusion of minorities, women and economically disadvantaged business owners in pursuit of government contracting opportunities. These historical practices are now being scrutinized and challenged in an unprecedented manner. Many federal, state and local municipalities and agencies have established contracting goals to engage minority, women and economically disadvantaged small business owners, whom have historically been underrepresented in government contracting. In 2002, the Nassau County Legislature passed Local Law Number 14-2002 (Title 53) entitled “Participation by Minority Group Members and Women in Nassau County Contracts,” designed to govern all County Contracts as defined by Title 53 and solicitations for bids or proposals for County Contracts. This legislation resulted in the establishment of the Minority and Women’s Business Enterprise Program (the “M/WBE Program”). The Nassau County Office of Minority Affairs was then charged with the development of oversight of the MWBE Program to include both economic development and diversity development initiatives to support Nassau County’s efforts to improve and expand the economy and economic opportunities for minorities and women in Nassau County. In 2005, the Nassau County Office of Minority Affairs promulgated Rules for the M/WBE Program including aspirational goals for County agencies utilizing certified M/WBEs as contractors or subcontractors. Although, affirmative language has been integrated into all covered contracts requiring selected contractors to make “best efforts” to solicit active participation by certified M/WBEs, many contractors seek waivers which are typically granted. Budget restrictions and significant staffing cuts to the Office of Minority Affairs have severely limited the oversight and services being offered under the M/WBE Program. Recent reports indicate an overall decline in spending on contracts for minority and women-owned businesses although the overall spending on contracts for public projects has increased. In an April 2015 Report, Maurice Chalmers, Director of the Independent Office of Legislative Budget Review, correctly noted that Nassau County may be in danger of losing New York state and federal funding due to the extent of its noncompliance. As the recipient of state and federal funding, Nassau County is obligated to comply with the applicable New York state and federal contracting regulations for publicly funded projects. Failure to comply may result in forfeiture and/or repayment of funds expended. This is a sobering prospect when taking into account the infusion of State and federal recovery funds in the aftermath of Super Storm Sandy. Federal funding to assist in the recovery efforts in the aftermath of Superstorm Sandy primarily originated from the U.S. Federal Emergency Management Agency (FEMA) and the U.S. Department of Housing and Urban Development (HUD). FEMA has issued guidance for local governments in accordance with procurement requirements Federal grants set forth at 44 C.F.R. § 13.36. This guidance contains provisions for “Socioeconomic Contracting” and states that grant recipients should: Take affirmative steps to assure small, minority, women-owned and labor surplus area firms are used: (a) Placing such firms on solicitation lists; (b) Soliciting such firms if they are potential sources; (c) Dividing requirements when possible; (d) Establish delivery schedules encouraging participation of such firms; (e) Using services of SBA, and the Minority Business Development Agency of the Department of Commerce; and (f) Requiring prime contractors to take these steps. Furthermore Section 3 of the 1968 Housing and Urban Development Act, as amended (12 U.S.C. 1701 u), (Section 3), HUD, as the primary source of disaster recovery funding for the County of Nassau, requires that contracting opportunities be made available “to the greatest extent feasible” to economically disadvantaged business owners that reside within the project area where funds are being expended. Section 3 sets forth statutory obligations for recipients of certain HUD financial assistance, including, but not limited to giving priority consideration to “Section 3 Businesses” when making HUD-funded procurement decisions. The contracting goals delineated under HUD Section 3 are minimum numerical targets that must be reached in order for HUD to consider a recipient in compliance. The minimum goals for contracting are: Ten (10) percent of the total dollar amount of all Section 3 covered contracts for building trades work for maintenance, repair, modernization or development of public or Indian housing or building trades work arising in connection with housing rehabilitation, housing construction and other public construction, shall be awarded to Section 3 businesses; and Three (3) percent of the total dollar amount of all non-construction Section 3 covered contracts, shall be awarded to Section 3 businesses. Recipients of Section 3 covered funding are required to ensure their own compliance with the Section 3 regulations, as outlined at 24 CFR § 135.32 which provides: Each recipient has the responsibility to comply with Section 3 in its own operations, and ensure compliance in the operations of its contractors and subcontractors. Nassau County did not receive a direct allocation of the disaster recovery funds from HUD. These funds were passed through the State of New York. As a pass-through allocation, these disaster recovery funds are also subject to the procurement regulations and contracting goals of the State. New York State enacted Article 15-A of the Executive Law, to promote equal opportunity in contracting for all persons, without discrimination for minority group members and women and business enterprises owned by them, and to eradicate the barriers that have impaired access by minority and women-owned business enterprises to State contracting opportunities. When signed into law in 1988, Article 15-A authorized the creation of an Office (now Division) of Minority and Women's Business Development to promote employment and business opportunities on state contracts for minorities and women. Under this statute, state agencies are charged with establishing employment and business participation goals for minorities and women. Subsequent legislation and Executive Orders have been enacted to strengthen Article 15-A in an effort to remove barriers that have impaired access by minority and women-owned business enterprises to New York State contracting opportunities. In October of 2014, New York State increased its utilization goals for MWBEs to 30% of contracting dollars – the highest MWBE contracting goals in the Nation. These goals apply to all New York State agencies, public authorities and public benefit corporations including any subsidiaries thereof. These goals are also passed through to New York State funding recipients, and prime contractors engaging in subcontracting opportunities. Therefore, Nassau County’s multi-billion dollar allocation of HUD sourced disaster recovery funds as passed through New York State is subject to both HUD Section 3 regulations and the State’s 30% contracting goals, as well as the County’s own M/WBE participation goals. Although Nassau County has written Section 3 Compliance and M/WBE Utilization Plans, agency procurement officers are often unfamiliar with plan details and the applicable local, state and federal regulations. Lack of integration of these regulations into the applicable agencies’ procurement processes, as well as insufficient monitoring and oversight, has left Nassau County vulnerable to significant penalties for non-compliance. The impacts of Nassau County’s non-compliance are multi-faceted. As reported by the Nassau County Independent Office of Legislative Budget Review in April of this year, there has been a significant decline in spending on contracts for minority and women-owned businesses in recent years. In July of 2015, the Office of the Nassau County District Attorney issued a Special Report on the Nassau County Contracting Process citing serious systemic deficiencies leaving the contracting process vulnerable to corruption, fraud and abuse. Failure to comply with federal, New York State, as well as Nassau County’s own M/W/DBE regulations has resulted in a denial of access to millions of dollars in contracting opportunities for qualified minority, women-owned and economically disadvantaged companies seeking to do business with Nassau County. As demonstrated by increased compliance monitoring on the state and federal levels, the findings of these recent reports, as well as ongoing investigations into Nassau County’s contracting process, historical contracting practices will no longer be tolerated. Charlene J Thompson, Esq. is a member of the Nassau County Bar Association Board of Directors, Chair of the MWBE Committee of the Long Island African American Chamber of Commerce and President of Thompson Economic Development Services, LLC. She is also a member of the Municipal Law, Real Property Law and Civil Rights Law Committees of the NCBA. _________________________________________________________________ See Nassau County Office of Minority Affairs 2007 Annual Report Measured by tracking and evaluating the overall percentage of contract dollars by certified MWBEs on an annual Basis. See Report: Nassau spending on minority and women-owned business contracts down, by Laura Figueroa (Newsday, May 24, 2015) See 24 CFR part 135 According to the April 2015 report issued by the Office of Legislative Budget Review, in 2012 Nassau spent $466 million on outside contracts, with $53 million, or 11 percent, g Reprinted with permission by the Nassau County Bar Association. going to minority- and women-owned businesses. In 2014, the county spent $503 million for contracts, but only $47 million, or 9 percent, went to minority- and women-owned businesses. Reprinted with permission by the Nassau County Bar Association.