Construction industry questions the city and state’s targets for contracting MWBEs

Photo courtesy the New York State Thruway Authority

Construction industry questions the city and state’s targets for contracting MWBEs

The construction industry questions New York City and state’s targets for contracting with minority- and women-owned businesses
December 19, 2017

In New York, progressive politicians have fought hard to help minorities and women get a foothold in the state’s lucrative and expansive construction industry for decades. The state Division of Minority and Women's Business Development within Empire State Development dates back to 1988 under the late Gov. Mario Cuomo.

And now his son, Gov. Andrew Cuomo, and New York City Mayor Bill de Blasio have put forth some of the most aggressive goals in the country for getting government contracts to minority and female business owners. New York City and state have each set goals of driving 30 percent of its contracts to minority- and women-owned businesses. Contractors must make a good faith effort to meet that goal and if they are unable to reach that goal, they must apply for a waiver and provide proof that the goal was not reachable.

The state has seen marked improvement in the number of MWBE businesses getting contracts. The city has enjoyed some gains in recent years as well.

But now, trade groups and contractors have been pushing back on putting so much stock in the monitoring of the numbers. The Associated General Contractors of New York State even filed a lawsuit against the state for records on how the goals are being established on individual projects.

RELATED: City Hall optimistic despite drop in MWBE contracting

Mike Elmendorf, the president and CEO of AGC, said that while increasing the participation of MWBE contractors in the industry is a shared goal between industry and government, setting the same goal for every project is the wrong way to go about achieving that goal – on top of being illegal.

“You end up with MWBE goals on projects which cannot be achieved because they are not based on reality or the law,” Elmendorf said. “Contractors and agencies are spending a lot of time trying to achieve a goal that wasn’t properly established in the first place.”

The lawsuit produced little in the way of documents. But the documents that were returned under court order showed that even when internal state agency studies were done to establish realistic goals on individual projects, those numbers were ignored and the 30 percent goal was used. In some cases agencies admitted that they never conducted a study, as is required under the law.

“We would like to see more diversity in this industry. But, what’s happening here, it is detached from the law and, more importantly, reality.” – Mike Elmendorf, Associated General Contractors president and CEO

The Cuomo administration has maintained that the goals are being set legally and that there is no such requirement that individual studies be conducted for each project.

“Contractors are legally entitled to a waiver if they can demonstrate through their good faith efforts that no MWBEs are reasonably available to participate on the contract,” Alphonso David, Cuomo’s counsel, told the Times Union last month. “In the 2016 fiscal year, the state granted over 85 percent of the waivers requested by contractors. Allegations that contractors must prove the ‘impossibility’ of achieving (those) goals are ridiculous, and not borne out by the facts.”

Elmendorf stressed that the objection to the statewide goal of 30 percent was not meant as an objection to the goals of the program, but rather a push to make the program more effective.

“We support the MWBE program and we object to discrimination in all forms,” Elmendorf said. “We would like to see more diversity in this industry. But, what’s happening here, it is detached from the law, the regulations that underpin the law and, more importantly, reality.”

RELATED: NYC officials on counteracting discrimination in the marketplace

Lawmakers who monitor MWBE participation want the 30 percent goal to continue on all projects.

In fact, Assemblywoman Rodneyse Bichotte, who chairs the Oversight of Minority and Women-Owned Business Enterprises Subcommittee, argued that based on disparity reports the number should be bumped up to 40 percent.

In her experience, not all contractors are on board with trying to meet the goals, Bichotte said.

“The reality is some people, some organizations just don’t want to have it,” Bichotte said. “That’s just the bottom line.”

State Sen. James Sanders Jr., the leader of a Senate task force on MWBEs, said that the higher goals have helped to push the overall numbers higher.

“There’s a saying that if you aim at nothing, you usually hit it,” he said.

“There’s a saying that if you aim at nothing, you usually hit it.” – state Sen. James Sanders

Still, these lawmakers agree that the MWBE program needs other reforms. There is a wide consensus that some of the most effective ways to help MWBEs gain ground in the construction industry would be to increase access to bonding, insurance and other funding often out of the reach of contractors just starting out, but looking to take the next step.

“MWBEs can’t get larger contracts because their challenges and the obstacles they meet are that they can’t get financing, they can’t get bonding, they can’t afford insurance because of Scaffold Law,” said Lou Coletti, the president and CEO of the Building Trades Employers’ Association of New York City. “To me, that’s the heart of the change you have to get to increase the opportunities for MWBE contractors. Those are the real business-related issues that are real obstacles to them in terms of more fully participating in the construction industry.”

Coletti cited the New York City School Construction Association, which has a program that prequalifies all contractors, as a model. But other agencies “don’t have the resources to both certify that the companies are owned 50 percent by MWBEs and then to go certify that everybody on those lists can perform a commercially useful function, which is required by the law,” he said.

Bichotte said she would love to see substantial funding added to state and city revolving funds for MWBEs, programs she described as “miniscule” at their current funding levels.

“I agree with a lot of the agencies, with a lot of the contractors’ recommendations,” she said.

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Justin Sondel
is a freelance reporter in Buffalo.