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October 08, 2010

 

DiNapoli: MWBE Firms Do Not Get Fair Share of Contracts

Audits, Report Show Persistent Problems with Current Program

New York State agencies continue to under-utilize minority- and women-owned businesses (MWBEs) when awarding procurement contracts, according to a research report issued today by State Comptroller Thomas P. DiNapoli. The report found the number of MWBE firms certified by Empire State Development remained relatively stagnant for more than two decades, and that state agencies often failed to meet their relatively low MWBE participation goals.

“MWBEs are typically small businesses that drive economic growth and create jobs,” DiNapoli said.  “And keeping the door closed to MWBEs is shutting out competition that could save tax dollars and expand our economy.  My office has committed a combined $1.6 billion in pension fund assets to small and upcoming firms through our Emerging Manager Program, and just added another $100 million to New York’s small business development fund. We’ve also identified best practices and widespread problems through our targeted audits. New York is making slow progress in broadening MWBE involvement but this report makes it clear that much more could be done.  New York needs to make MWBEs a more integral part of its procurement process.”

DiNapoli’s report cited significant discrepancies between the number of MWBEs available to perform contracts and those who receive business from state agencies. While minority-owned firms in New York account for 25 percent of all businesses, they earned less than three percent of total sales and receipts. Similarly, women head 30 percent of New York’s firms but earn only four percent of sales and receipts. Combined, women and minority-owned firms received only five percent of State agency contract dollars on average between 2004 and 2008.

The report also reveals data from a recent MWBE State Audit Review Session. Held in conjunction with Empire State Development (ESD), the session participants noted:

  • Only five percent of New York’s estimated 160,000 eligible MWBE firms are certified;
  • While agency contracts with MWBEs increased to $805 million from $560 million over the last three years, this represented only a 1.5 percent rise in overall agency spending on minority and women-owned businesses;
  • Some agencies arbitrarily changed their definition of discretionary spending from quarter to quarter, distorting both target and actual MWBE participation figures, and;
  • More than half of all State agencies set their MWBE goals at 5 percent or less of annual discretionary spending.

DiNapoli’s report recommended a two-pronged remedy that strengthens race- and gender-neutral initiatives while also improving specific outreach to women- and minority-owned firms. These recommendations include:

  • Launching a small business target market program that allows MWBEs and other small businesses to compete for contracts on a more level playing field ;
  • Expanded access to financing programs like ESD’s Capital Access Pilot Program and the Common Retirement Fund’s small business lending program;
  • Breaking State contracts into smaller, less complex pieces to increase the number of eligible MWBE bidders, and;
  • Improving communication and outreach to MWBE firms to make it easier for these businesses to compete for contracts.

About the MWBE Program

New York State’s MWBE program was created in 1988 and is managed by ESD’s Division of Minority and Women’s Business Development. State agencies are allowed to purchase goods and services under $200,000 from MWBEs without formal competitive bids. All agencies and public authorities are required by law to promote MWBE participation, create annual MWBE participation goals and report their actual levels of MWBE usage to ESD. The Office of the State Comptroller periodically conducts audits of State agencies to measure their level of MWBE participation.

Click here to read the full report.  To read MWBE-related audits, visit http://www.osc.state.ny.us/audits/index.htm

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