EDV-04-14-00010-P Minority and Women-Owned Business Enterprise Program

1/29/14 N.Y. St. Reg. EDV-04-14-00010-P

NEW YORK STATE REGISTER

VOLUME XXXVI, ISSUE 4

January 29, 2014

RULE MAKING ACTIVITIES

DEPARTMENT OF ECONOMIC DEVELOPMENT

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. EDV-04-14-00010-P

Minority and Women-Owned Business Enterprise Program

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of Parts 140-145 of Title 5 NYCRR.

Statutory authority:

L. 2010, ch. 175

Subject:

Minority and Women-Owned Business Enterprise program.

Purpose:

Update the regulations of the Division of Minority and Women's Business Development.

Substance of proposed rule (Full text is posted at the following State website:www.esd.ny.gov):

The proposed regulation makes extensive changes to the existing regulations governing the Division of Minority and Women’s Business Development (“DMWBD”) and the Minority and Women-Owned Business Enterprise (“MWBE”) program. For the purpose of clarity, the regulation repeals existing Parts 141 and 142 of 5 NYCRR and replaces them with new Parts 141 and 142. In addition, amendments to Parts 140, 143, 144 and 145 will be outlined in further detail below. The following is a brief summary of the substantive changes made in the new Parts 140-145:

1) The regulation adds four new definitions to Part 140, including the definitions of the terms “commercially useful,” “disparity study,” “master goal plan” and “update to master goal plan.” Importantly, the regulation amends the definition of “certified enterprise or certified business,” “contracting categories,” “minority-owned business enterprise,” “personal net worth,” “state agency,” “subcontract,” “substantially fails,” “value added,” and “woman-owned business enterprise.” The regulation deletes references to “The 2010 disparity study.”

2) The regulation replaces the existing requirement for agencies to adopt annual goal plans with a requirement to adopt a master goal plan at least once every four years. This master goal plan is to include specific goals for MWBE participation with respect to the four procurement categories covered under the program: construction, construction related services, services, and commodities. Furthermore, the regulation establishes criteria to be taken into account by agencies in establishing their master goal plans.

3) The regulation clarifies State agencies’ annual goal setting process by requiring each State agency to set agency-specific goals in accordance with Article 15-A of the Executive Law.

4) The regulation clarifies submission procedures for State agencies’ master goal plans and updates thereto. State agencies are required to submit master goal plans, or updates to master goal plans, to the Director of the DMWBD annually on or by January 15. Proposed master goal plans are to be reviewed by the Director to determine whether they are reasonable and appropriate in light of agency procurement circumstances. The Director is empowered to reject unreasonable submissions, and to require submitting agencies to amend their submission or, where appropriate, set goals on behalf of a State agency.

5) The regulation introduces additional factors to be considered by the Director when assessing a State agency’s “good faith efforts” including State agencies’ processes and procedures concerning goal-setting, utilization plans, utilization reports and waivers.

6) The regulation provides that a State agency may be found to have failed to meet its good faith standard if it refuses or fails to submit a master goal plan or update to the master goal plan to the DMWBD.

7) The regulation clarifies minimum standards for agencies’ submissions of remedial action plans to the Director after an agency substantially fails to meet its agency-specific goals.

8) The regulation requires agencies to set goals, where practical, feasible, and appropriate, for minority-owned, women-owned, and overall MWBE utilization on State agency contracts. The regulation further introduces additional factors to be considered by State agencies in determining whether goals are appropriate with respect to individual contracts, including: potential subcontracting opportunities available in the prime contract; MWBE availability as identified in the most recent disparity study with respect to the subcontracting opportunity; the number and types of MWBEs found in the state MWBE directory; the geographic location of contract performance; the extent to which geography is material to the performance of the contract; the ability of certified MWBEs located outside of the geographic location of contract performance to perform on the contract; and, the agency’s annual utilization goal.

9) The regulation clarifies that a contractor that is a certified MWBE may use the work it performs on a state contract to meet requirements for use of certified MWBEs as subcontractors.

10) The regulation makes technical amendments to language and clarifies standards for agencies’ evaluation of contractors’ diversity practices. Diversity Practices will only be assessed, where practical, feasible and appropriate, in best value contracts over $250,000. Where an agency determines that it is practical, feasible and appropriate to evaluate the diversity practices of a contractor, the agency is directed by the regulation to require such information to be included in the contractor’s bid or proposal, and to establish a quantitative factor for evaluating diversity practices. The regulation further clarifies that numerical guidelines will be provided to State agencies by the Director for the purpose of evaluating contractors’ diversity practices.

11) The regulation adds the requirement that certified MWBEs must be able to perform commercially useful functions in order to be listed on accepted utilization plans. The regulation further requires each utilization form to contain a statement acknowledging that use of certified MWBEs for non-commercially useful functions is strictly prohibited.

12) The regulation disallows the acceptance of alternative plans in lieu of acceptable utilization plans that identify the manner in which contractors plan to utilize certified MWBEs to achieve contract goals set forth in solicitations.

13) The regulation disallows contractors to take MWBE utilization credit for contract performance by any certified MWBE that has not performed a commercially useful function.

14) The regulation clarifies the ability of a State agency to disqualify a contractor as non-responsive for failure to remedy a deficient utilization plan.

15) The regulation provides that, in assessing whether a contractor made a good faith effort to satisfy utilization plan goals, an agency may consider whether a contractor knowingly utilized, or submitted compliance reports indicating the utilization of, MWBEs the contractor knew or reasonably should have known could not or did not perform a commercially useful function on a State contract.

16) The regulation permits agencies to consider, inter alia, the extent to which contractors’ own actions contributed to contractors’ inability to meet the maximum feasible portion of contract goals in assessing waiver requests.

17) The regulation allows agencies, in instances where agencies are not evaluating contractors’ diversity practices, to establish a quantitative scoring factor for bidders’ certified MWBE status.

18) The regulation adds work force utilization data collection requirements for contracts over $250,000 and removes work force collection requirements that were inconsistent with Article 15-A of the Executive Law.

19) The regulation requires the DMWBD to notify applicants of deficiencies in their applications to be certified as MWBEs within thirty days of the initial date stamped on their application.

20) The regulation requires the DMWBD to provide applicants with notice that their application is complete.

21) The regulation provides for the ability of the DMWBD to request and assess additional information, including tax and financial information, leases and business agreements, to ascertain applicants’ program eligibility.

22) The regulation provides for the ability of the DMWBD to request and assess additional information to ascertain and/or identify an applicant’s ability and/or capacity to perform a commercially useful function on certain State contracts.

23) The regulation prohibits the investigation of third-party allegations that an MWBE no longer meets program certification requirements except where the allegations are specific and supported by facts.

24) The regulation establishes that a presumption of eligibility shall remain in effect during the pendency of a challenge to the continued eligibility of a firm for certification as an MWBE.

Text of proposed rule and any required statements and analyses may be obtained from:

Karanja Augustine, NYS Department of Economic Development, 625 Broadway, 8th Floor, Albany, NY 12245, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

STATUTORY AUTHORITY:

Chapter 175 of the Laws of 2010 empowers the Commissioner of the Department of Economic Development to promulgate regulations for the administration of the Minority and Women-Owned Business Enterprise (“MWBE”) program. This authority includes the adoption of procedures for the adoption of goal plans by state agencies for MWBE utilization, review of utilization plans by contractors, and certification of businesses as MWBEs. This regulatory impact statement is submitted in conjunction with the submission of a permanent regulation.

LEGISLATIVE OBJECTIVES:

The proposed rule is in accord with the public policy objectives the New York State Legislature sought to advance by enacting the MWBE Program. The program requires state agencies to set goals for participation by minority and women-owned businesses on agency contracts, and to approve utilization plans by contractors for the use of certified MWBEs on their contracts. It is the public policy of New York to address historic discrimination in the state contracting market, and to achieve the economic benefits associated with a competitive state contracting market free of discrimination, through the MWBE program. The proposed rule helps to further such objectives by updating the procedures through which agencies establish goals for participation in state contracts by minority and women-owned businesses, refining the criteria for goal setting so as to better reflect the individual circumstances and capacities of each agency, and modifying the metrics by which agencies assess the availability of minority and women-owned businesses and grant exemptions to contractors’ utilization plans.

NEEDS AND BENEFITS:

This rulemaking is made pursuant to Chapter 175 of the Laws of 2010. The statute authorizing the MWBE Program directs the Commissioner of the Department of Economic Development to establish procedures for the administration of the program.

New York has a history of unequal access to performance on state contracts for businesses owned by women and minorities. The state has addressed these disparities, in part, through the MWBE program. Disparities in access to state contracts have been reduced, but continue to persist in all four of the areas of state contracting addressed by the MWBE program: construction, construction related services, services, and commodities.

Certain provisions of the regulations administering the program have become redundant as program objectives and obligations have been achieved. Furthermore, certain aspects of the administration of the program relating to the setting of goals by agencies and the assessment of the availability of minority and women-owned businesses have not been optimized.

The proposed regulation addresses the shortcomings of the existing regulations in a number of ways. First, these rules update the regulations so as to remove references to historic goals and obligations, and replaces such references with durable language that will not need to be updated through similar rulemakings in the future. Furthermore, the rules adjust the procedures by which agencies set goals for contract participation by minority and women-owned businesses so as to better reflect the individual needs and capabilities of each agency. Additionally, the rules expand the scope of agency review of requests by contractors for waivers from goal requirements to better hold contractors accountable to the purposes of the program, as well as the metrics by which the availability of minority and women-owned businesses are assessed in the process of setting contract-specific goals.

COSTS:

I. Costs to private regulated parties (contractors on state contracts): None. The proposed regulation will not impose any additional costs on contractors awarded state contracts.

II. Costs to the regulating agency for the implementation and continued administration of the rule: None.

III. Costs to the State government: None.

IV. Costs to local governments: None. The proposed regulation will not impose any costs on local governments.

LOCAL GOVERNMENT MANDATES:

None. There are no local government mandates associated with the MWBE program.

PAPERWORK:

The rule does not establish any paperwork burdens in addition to those already imposed under the regulation.

DUPLICATION:

The proposed rule will amend an existing section of the regulations of the Commissioner of the Department of Economic Development, Parts 140–45 of 5 NYCRR. Accordingly, there is no risk of duplication in the adoption of the proposed rule.

ALTERNATIVES:

No alternatives were considered with regard to creating a new regulation in response to the statutory requirement. The regulation updates existing provisions of the NYCRR. This action is necessary in order to update redundant language, and to streamline the procedures of the program related to goal setting and adoption of utilization plans for agency procurement contracts.

FEDERAL STANDARDS:

There are no federal standards applicable to the MWBE Program; it is purely a state program that promotes participation on certain state procurement contracts by minority and women-owned businesses. Therefore, the proposed rule does not exceed any federal standard.

COMPLIANCE SCHEDULE:

The affected agency (Department of Economic Development) and any affected contractors seeking to perform on state procurement contracts will be able to achieve compliance with the regulation as soon as it is implemented.

Regulatory Flexibility Analysis

Application to the minority and women business enterprise (MWBE) program is entirely at the discretion of each eligible business enterprise. Neither Executive Law Article 15-A nor the proposed regulations impose an obligation on any local government or business entity to participate in the program. The proposed regulation does not impose any adverse economic impact, reporting, record-keeping, or other compliance requirements on small businesses and/or local governments. In fact, because by law MWBE firms must be small businesses, the proposed regulations may have a positive economic impact on small businesses as the changes created in the proposed regulations may increase the number of certified small businesses that are able to access contracting opportunities throughout New York State.

For clarification purposes, the changes crafted in the proposed regulation do not affect local governments because MWBE contract and reporting requirements attach to New York State funded contracts, not locally funded projects. Because it is evident from the nature of the proposed rule that it will have either no substantive impact, or a positive impact, on small businesses and local governments, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small businesses and local government is not required and one has not been prepared.

Rural Area Flexibility Analysis

The minority and women business enterprise program is a statewide program. There are eligible businesses in rural areas of New York State. However, participation in the program is entirely at the discretion of eligible business enterprises. The program does impose some responsibility on those businesses which participate such as submitting applications and reports. None of those requirements, however, are being changed by this amendment. The rule change will not impose any additional substantial reporting, record keeping or other compliance requirements on public or private entities in rural areas. Therefore, the regulation will not have a substantial adverse economic impact on rural areas and will not impose reporting, record keeping or other compliance requirements on public or private entities in such rural areas. Accordingly, a rural area flexibility analysis is not required and one has not been prepared.

Job Impact Statement

The Minority and Women-Owned Business Enterprise (MWBE) program aims to remedy disparate access to performance on state contracts for minority and women-owned businesses. The amendments to the MWBE program update certain redundant provisions of the regulation, and streamline the procedures by which agencies set goals and evaluate the availability of MWBEs. To the extent that the regulation increases the utilization of MWBEs, it will not have a substantial adverse impact on jobs and employment opportunities as it will neither decrease nor increase the available work through state procurements. Because it is evident from the nature of the rulemaking that it will have no impact on job and employment opportunities, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.