Is Cuomo’s MWBE Bill the Chance Minorities Need or an Impossible Dream?

By James Duffy

Governor Andrew Cuomo (D) of New York is working to overhaul the state’s regulations regarding minority-and-women-owned business enterprises (MWBE) in contracting.[1]  New York’s MWBE program aims to use state resources to aid minority-owned businesses in bidding for state contracts and to improve the participation rate of minorities in the economy.[2]  Since 2011, the program has seen  MWBEs win over $10.4 billion in state contracts and state certification of over 6,600 MWBEs and the re-certification of over 4,700 MWBEs.[3]  However, in early 2018, Governor Cuomo announced that the state could do much more to encourage minority participation in the workforce.[4]  Thus, he announced his intention to both recertify and overhaul the existing MWBE program.[5]

The new program expands the pool of contracts available to MWBEs by applying the diversity hiring goal of thirty percent to all contracts using state dollars; including those at the local and municipal level.[6]  The Governor also proposed creating new participation goals for non-MWBE contractors, allowing the state to give MWBEs exclusive contracts valuing up to $400,000, and ensuring that $1.4 million contracts must be given to MWBEs even if their proposed price is higher than their competitors.[7]

The Governor’s office has indicated that the new bill will include harsher punishments and disincentives to encourage higher diversity hiring rates and prevent fraud in the system.[8]  Under this new regime, companies that fraudulently claim to hire MWBEs to fulfill state contracting goals could be charged with a misdemeanor or felony.[9]  Additionally, failing to make a good-faith effort would mean violating companies could be removed from active state contract bidding.[10]  This inactivity would last for a legislatively-determined period.[11]  The state’s history with MWBE legislation gives some hope that this new, more stringent program can achieve the stated goals.  In 2017 alone, New York had an MWBE participation rate of over twenty-seven percent, which comprised contracts valuing over $2.2 billion in State contracts.[12]  These are both the greatest number of state contracts, and highest value contracts, given to MWBEs in the nation.[13]  However, contractor organizations have raised legal challenges to these changes.[14]

Mike Elmendorf, the president and CEO of Associated General Contractors (AGC), has said that the thirty percent minority participation rate is an artificially created number found nowhere within state law.[15] The reason for his antipathy towards the expansion of this hiring goal is that Elmendorf believes that there are simply not enough MWBEs available to reach the governor’s goals; resulting in a spike of requested waivers rather than hiring.[16]  Additionally, Elmendorf argued that, beyond the unreasonable goals on display, the effort required to show a good faith was time consuming and took away resources that should be spent on encouraging hiring and job performance.[17]  What the city should be doing, he argues, is creating a more reasonable hiring goal and to take an active step in nurturing MWBEs’ ability to take up these contracts rather than simply arbitrarily raising hiring goals at the state level and imposing it on localities.[18]  A final concern was that the governor’s office was not conducting the studies it claimed justified the thirty percent goal as multiple document requests for these studies resulted in state officials admitting that no such studies existed.[19]

The proposed changes to the MWBE are meant to generate new opportunities for minority and women-owned business by encouraging higher diversity hiring goals and devoting more state funds to giving these businesses contracts.  However, the new law has been dogged by several allegations of arbitrary or borderline illegal conduct that undermines the purpose behind the legal changes.[20]  Currently, there have been no updates on the proposed law, but it will likely be an uphill battle between Governor Cuomo and existing organizations like the AGC over the best path forward towards a more inclusive and productive workforce.

[1] Michael DeMasi, Cuomo Wants Sweeping Changes to New York’s MWBE Law, biz journals (Feb. 5, 2018), https://www.bizjournals.com/albany/news/2018/02/05/cuomo-wants-sweeping-changes-to-new-yorks-mwbe-law.html (last visited Mar. 19, 2018).

[2] Governor’s Press Office, Governor Cuomo Announces Legislation to Reauthorize MWBE Program Legislation and Expand MWBE Program to All State-Funded Contracts, New York State (Feb. 5, 2018), https://www.governor.ny.gov/news/governor-cuomo-announces-legislation-reauthorize-mwbe-program-legislation-and-expand-mwbe (last visited Mar. 19, 2018).

[3] Id.

[4] Id.

[5] DeMasi, supra note 1.

[6] DBE Good Faith, Governor Seeks Changes to Statewide MWBE Program, dbe goodfaith (Feb. 6, 2018), https://www.dbegoodfaith.com/dbe-mbe-wbe-dvbe-news.php?news_id=1967&news_title=Governor+seeks+changes+to+statewide+MWBE+program (last visited Mar. 19, 2018).

[7] Governor’s Press Office, supra note 2 (clarifying that MWBEs would be awarded these contracts even if their proposed price was 10% higher than their closest competitor).

[8] Id.

[9] DeMasi, supra note 1.

[10] Id.

[11] Id. (explaining that goals per contract would be based on census data and availability of minority groups in the region, and that those contractors who do not believe they can fulfill the hiring goals can seek a waiver from state requirements).

[12] Governor’s Press Office, supra note 2.

[13] Id.

[14] Chris Bragg, Questions Raised on Cuomo Contracting Push, timesunion (Nov. 25, 2017), https://www.timesunion.com/local/article/Questions-raised-on-Cuomo-contracting-push-12383539.php (last visited Mar. 19, 2018).

[15] Id.

[16] Id. (detailing that in 2013, agencies requested 373 waivers and got 243, while in 2016 agencies requested 1,366 waivers and were granted 1,157).

[17] Id. (arguing that contractors must cull the state’s list of certified minority subcontractors and try hiring them to show a good-faith effort even if they already know reaching that goal is impossible).

[18] Id.

[19] Chris Bragg, Questions Raised on Cuomo Contracting Push, timesunion (Nov. 25, 2017), https://www.timesunion.com/local/article/Questions-raised-on-Cuomo-contracting-push-12383539.php (last visited Mar. 19, 2018) (showing that multiple projects by the state’s Department of Environmental Conservation and state Insurance Fund had not performed or received any studies that indicated the thirty percent hiring goal in their proposed contracts was feasible or possible).

[20] Id. (explaining that AGC has accused the law of establishing illegal quotas in contravention of the state constitution and forcing contractors to expend time and resources for an impossible goal).

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