11/20/17: New York City Comptroller Making The Grade 2017 Research Report

Executive Summary

New York City is home to the most diverse business community in the country, and the success of New York City’s minority- and women-owned businesses (M/WBEs) – which collectively employ almost 600,000 New Yorkers – is critical to the city’s economy.1 This is particularly the case in communities where business owners are confronting today’s deep affordability crisis while facing long entrenched economic disparities.

The City has the ability to confront both of these challenges by choosing to purchase goods and services from M/WBEs that are likely to use those funds to grow jobs, invest locally, and create wealth in all corners of the five boroughs.2 In addition, by contracting with a diverse array of businesses, the City fosters the competition needed to spend taxpayer dollars most efficiently. Consequently, a vibrant M/WBE program is vital for the fiscal and economic health of the City and its communities.

Since 2014, the Office of New York City Comptroller Scott M. Stringer has annually evaluated the performance of the City and its individual agencies on their spending with M/WBEs.3 Building on that previous work, this year’s report provides both an analysis of the City’s 2017 M/WBE performance and a more comprehensive review of the M/WBE program as a whole since 2014.

The City has made tangible progress since 2014. In 2015, Mayor de Blasio set a goal of awarding $16 billion to M/WBEs by 2025.4 Building on that commitment, in September 2016, the Mayor designated high-level City Hall personnel to oversee the M/WBE program and committed the City to awarding 30 percent of the dollar value of contracts to M/WBEs by 2021 while increasing the number of certified M/WBEs to 9,000 by 2019.5 In May 2017, the City announced that it was on its way to meeting the $16 billion goal and had grown the number of certified firms to over 5,000.6 And, more recently, the City’s Fiscal Year (FY) 2017 Agency Procurement Indicators Report found that the City had increased its M/WBE procurement awards from $463.5 million in FY 2015 to $1.037 billion in FY 2017.7

While these announcements demonstrate positive steps forward, this report finds that there is ample room for continued progress. Specifically, in FY 2017:

  • The City procured a total of $21 billion in goods and services, of which slightly more than $1 billion, or only 4.9 percent, was awarded to M/WBEs.8
  • Only 22 percent of New York City’s 5,259 certified M/WBEs received City spending.
  • Overall, the City received a “D+” grade from the Comptroller’s Office, the same as in FY 2016. More specifically, the City earned a C grade with Asian American-owned firms, a D grade with Hispanic-owned firms and women-owned firms, and an F grade with Black-owned businesses.
  • Compared to FY 2016, grades increased at 13 agencies, but decreased at seven agencies and stayed the same at 11 agencies. Overall, 42 percent of agencies saw their grade increase in the last year.
  • Three agencies received an “A” grade, the Commission on Human Rights, the Department for the Aging, and the Department of Small Business Services, while four agencies received “F” grades, the Department of Buildings, the Department of Citywide Administrative Services, the Department of Sanitation, and the Department of Transportation. Notably, the combined amount spent overall for the three agencies that received an “A” grade is less than one percent of the dollars graded in FY 2017, while the 13 agencies that received either a “D” or “F” grade account for 89 percent of the City’s grade.

With the FY 2017 analysis complete, the Comptroller’s Office has analyzed the last four years of data on the City’s M/WBE program and found that:

  • M/WBE awards, as a share of total City contracts, increased from 9 percent in FY 2014 to 4.9 percent in FY 2017, although a high of 5.3 percent was reached in FY 2015.
  • Annual spending with M/WBEs increased to $554 million in FY 2017, a $208 million increase since FY 2014.
  • The number of City-certified M/WBEs increased from 4,115 in FY 2015 to 5,259 in FY 2017 and the percentage of M/WBEs that received spending increased from 18 percent to 22 percent during this time.
  • Compared to FY 2014, more City agencies are receiving “A” and “B” grades while fewer are receiving “D” and “F” grades in FY Specifically, in FY 2014, only two agencies earned an “A” or “B” while 21 received a “D” or “F,” compared to FY 2017, when 12 agencies earned an “A” or “B” and 13 received a “D” or “F.”

The City must continue to make progress to meet its important goal of awarding 30 percent of the dollar value of contracts to M/WBEs by 2021. Indeed, City leadership on this issue is of national importance, as New York and the nation face the potential for federal disinvestment in programs that support M/WBEs, including a proposal by President Trump to eliminate the Minority Business Development Agency (MBDA) and cut funding for the Small Business Administration (SBA).9 For that reason, this report also makes a number of policy recommendations that will help the City attain the Mayor’s goals and increase its spending with M/WBEs. Specifically, this report calls on the City to take the following steps:

  1. The City should assess large contracts with upcoming renewals and consider re- bidding those contracts to create new M/WBE opportunities. A number of the City’s largest contracts will reach their conclusion in the coming years, presenting an opportunity for the City to evaluate whether they should be renewed or re-bid. That decision is made on a case-by- case However, through re-bidding and “debundling” them into smaller contracts, greater procurement opportunities could exist for M/WBEs. For instance, in FY 2017, the City’s largest vendors received $2.3 billion in City spending. These vendors collectively hold 148 contracts ending over the next four years with a combined total value of $4.5 billion.10 Local Law 1 already requires the City to review new procurements over $10 million to examine whether they should be “debundled.” Although this law does not require the City to conduct the same review of large renewal contracts, the City should still determine whether it is appropriate to exercise renewal or to re-bid at the point of expiration.
  2. A working group composed of all certifying bodies and relevant stakeholders from the City and State should convene to streamline the M/WBE certification process and move towards a single platform for certification. Currently, there are more than 10 institutions that certify businesses in New York City that are owned by minorities, women, or other historically disadvantaged groups. Even with recent improvements, the redundancy within the various certification processes poses a barrier to firms seeking to certify across multiple government agencies. The City should work with other certifying entities to simplify the process and make it easier for M/WBEs to become certified across multiple government The Office of the New York City Comptroller will work collaboratively with interested parties to pursue this goal.
  3. Every City agency should hire a full time Chief Diversity Officer to focus exclusively on M/WBE accountability. Local Law 1 requires every agency to designate an executive officer as an M/WBE Officer, but the application of this requirement is uneven, and it does not require the M/WBE Officer to focus full time on supplier In order to drive compliance, each agency should hire a Chief Diversity Officer (CDO). Similar to the M/WBE Officer, the CDO would report directly to the agency head. However, M/WBE accountability would be the full time focus of the CDO, rather than just one part of their larger portfolio. This directive could be given by City Hall, or could be accomplished through City Council legislation to create long term sustainability beyond any one administration.

As with previous years, these findings are based on a review of 32 City agencies: 31 mayoral agencies and the Office of the Comptroller. The grades are based on actual spending with M/WBEs during the fiscal year rather than the value of contracts awarded, because the value of contracts may or may not result in real dollars being spent over time. Therefore, the grades represent an assessment of the City’s real-time utilization of M/WBEs, rather than an estimate of future year M/WBE spending.

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