LOCAL LAW 129

In January, 2005, the Committee on Contracts of the New York City Council released the results of a "disparity" study it had commissioned regarding the "participation of minority and women-owned business enterprises" ("M/WBE") in City contracts. The results of the study purported to show that "relative to their capacity and availability in the City's marketplace," M/WBEs did not receive an equitable share of City contracts. As a result, Mayor Michael Bloomberg signed Int. No. 727-A into law as Local Law 129 in December, 2005. Local Law 129 establishes rules and regulations addressed (in the first instance) to City agencies contracting for goods and services. Specifically, Local Law 129 establishes a program that requires all City agencies that procure goods and services with a value of more than 5 million dollars per year to set numerical goals to enhance contracting opportunities for M/WBEs for prime and subcontracts valued at under 1 million dollars. With respect to construction services, purchased by agencies such as DDC, HA, EDC, etc., therefore, these agencies are mandated to increase MBE participation in the agency's award of prime contracts of under one million dollars and to increase the number of MBE contractors who are awarded subcontracts (by a prime contractor) with a value of less than one million dollars.

The Department of Small Business Services (DSBS), part of the Division of Economic and Financial Opportunity, is charged with oversight of the program. Individual agencies, however, are ultimately responsible for establishing and implementing "reasonable measures and procedures to secure the meaningful participation" of M/WBEs in procurement of City contracts. In order to ensure accountability of individual agencies, each one must designate a deputy commissioner or other executive officer to create and oversee that agency's program. By May 15, 2006, each agency with procurements in excess of 5 million dollars for the preceding fiscal year must submit an agency utilization plan for the upcoming fiscal year. The plan must include the agency's goals, strategies for meeting the goals and a list of the personnel responsible for overseeing and implementing the agency's strategy.

The Citywide goals set forth in Local Law 129 are as follows:

	
A.	Construction contracts under one million dollars is as follows:
	(1) Race/Gender Group
	(a)	Black Americans - 12.63% of total annual
			agency expenditures on such contracts;
	(b)	Hispanic Americans- 9.06% of total annual agency
			expenditures on such contracts.

B.	Construction subcontracts under one million dollars:
	(1) Race/Gender Group
	(a)	Black Americans - 12.63% of total annual
			agency expenditures on such contracts;

	(b)	Hispanic Americans- 9.06% of total annual agency
			expenditures on such contracts;
	(c)	Asian Americans - 9.47% of total annual
			agency expenditures on such contracts.

While agencies do not have the discretion to determine their own goals, they do have discretion to determine how to best achieve those goals. For example, agencies are required to determine whether entering into separate prime contracts for various "construction support services" like landscaping, trucking, demolition and site security, would foster participation by M/WBEs. With respect to subcontracts, the agency must establish target participation goals that are equal to the percentage of the total contract the agency anticipates a typical prime contractor would normally award to subcontractors at amounts under 1 million dollars.

WHAT THIS MEANS FOR YOU

For contractors bidding on jobs with participation goals, each bid must be accompanied by a "utilization plan," which indicates the percentage of work it intends to subcontract, the percentage of work it intends to award to subcontractors for amounts under one million s dollars, a description of the type of work, a dollar value of work designated for participation by MBEs and the time frames the work is scheduled to begin and end. Within 30 days of the issuance of a notice to proceed on a particular contract, the contractor must submit a list of persons it intends to award subcontracts to in the next 12 months. To ensure compliance with program requirements, the Comptroller is required to randomly examine contracts for which utilization plans have been established.

Once awarded a contract, with each voucher submitted for payment, the contractor must submit a statement, certified under penalty of perjury, including the total amount paid to all subcontractors as well as the names and addressed of all MBEs hired as subcontractors and the dates and amounts of payment to each one. Bids in which the bidder states an intention not to subcontract will be considered unresponsive unless the agency grants a waiver of the subcontracting target.

A contractor who does not plan to subcontract at all, or at the amount the agency establishes in a target subcontracting percentage, may be granted a waiver of the subcontracting target if it can demonstrate that it has the capacity to complete all of the work and a bona fide intent not to subcontract. Evidence of a bona fide intent not to subcontract would include the contractors past subcontracting practices. (Of course, a contractor that is granted a target subcontracting percentage waiver or reduction would be required to meet the MBE participation goals established for the contract, if it should determine at a later time that it will award subcontracts under the contract.)

A contractor may also request a modification of its utilization plan for subcontractors, but will only receive such a modification if it documents its good faith efforts at meeting the goals set forth in the plan. "Good faith efforts" under Local Law 129 include:

• Advertising opportunities to participate in the contract, where appropriate, in general circulation media, trade and professional association publications and small business media, and publications of minority and women's business organizations;
• Providing notice of specific opportunities to participate in the contract, in a timely manner, to minority and women's business organizations;
• Sending written notices, by certified mail or facsimile, in a timely manner, to advise MBEs and WBEs that their interest in the contract was solicited;
• Identifying portions of the work that could be substituted for portions originally designated for participation by MBEs and/or WBEs in the contractor utilization plan, and for which the contractor claims an inability to retain MBEs or WBEs;
• Meeting with MBEs and/or WBEs prior to the date their bids or proposals were due, for the purpose of explaining in detail the scope and requirements of the work for which their bids or proposals were solicited;
• Efforts to negotiate with MBEs and/or WBEs as relevant to perform specific subcontracts, or act as suppliers or service providers;
• Submitting timely written requests for assistance to the agency M/WBE liaison officer and to the Division of Economic and Financial Opportunity; and
• Explaining how recommendations made by the Division and the contracting agency were acted upon, and why such action did not lead to the desired level of participation of MBEs and/or WBEs."

Agencies are also required to establish target subcontracting percentages and MBE participation goals for change orders the value of which exceed ten percent of the underlying construction or construction-related contract.

If an agency has reason to believe that a contractor has violated the law, either based upon a complaint filed by an individual or through its own information, the agency is authorized to impose certain remedies, including: (1) entering into an agreement with the contractor allowing the contractor to cure the violation; (2) revoking the contractor's pre-qualification to bid; (3) finding that the contractor is in default of the contract; (4) terminating the contract; (5) declaring the contractor to be in breach of contract; (6) withholding payment or reimbursement; (7) determining not to renew the contract; (8) assessing actual and consequential damages; (9) assessing liquidated damages or reduction of fees; (10) exercising rights under the contract to procure goods, services or construction from another contractor and charging the cost of such contract to the contractor that has been found to be in noncompliance; (11) or any other appropriate remedy.

M/WBE found to have violated the requirements of the law, or the rules promulgated pursuant to it, can have its M/WBE certification revoked.

THE BOTTOM LINE

City agencies are going to be under scrutiny regarding goods and services contracts and subcontracts with respect to what percentage are awarded to M/WBEs. City agencies in turn will be carefully examining all bids submitted to ensure that contractors and subcontractors have made good faith efforts to use M/WBEs. If you are submitting a bid to a City agency, you will have to submit a utilization plan with the bid. Then if awarded the contract, with every voucher, contractors will have to submit statements detailing the total amount paid to all subcontractors, the names and addresses of all M/WBEs hired as subcontractors and the dates and amounts of payment to each one. The consequences to both the agencies that fail to take the law seriously and to the contractors are significant. It may require additional work, up front, but in the end, it will ensure that a contractor acquires and maintains a good reputation with City agencies and is awarded City contracts.