GO Item 1
September 17, 2015
Worksession 2
MEMORANDUM
TO:
Government Operations and Fiscal Policy Committee
FROM:
SUBJECT:
Robert H. Drummer, Senior Legislative Attorney
Pi2J­
Worksession 2:
Bill 61-14, Contracts and Procurement - Local Business
Subcontracting Program
Expected attendees:
Cherri Branson, Director of Procurement
Pam Jones, Procurement
Grace Denno, Procurement
Bill 61-14, Contracts and Procurement - Local Business Subcontracting Program,
sponsored by the Council President at the request of the County Executive, was introduced on
November 25, 2014. A public hearing was held on January 13 and a Government Operations and
Fiscal Policy Committee worksession was held on March 19.
Background
Bill 61-14 would establish a Local Business Subcontracting Program requiring 10% of the
dollars related to an initial procurement contract award that is estimated to be valued at more than
$10 million to be subcontracted to a Local Business. The Bill would define a local business as a
for-profit business that
has
its principal place of business in the County. The Bill would also
require the Executive
to
adopt a regulation, by Method 2, further defining a local business and the
certification process. The Director of the Office of Procurement
I
or her designee would be
responsible for certifying a business as a local business. The Bill would also authorize the Director
to waive all or part of the local subcontracting requirements for a specific contract.
The Bill would take effect on July 1,2015 and apply to a solicitation for a high dollar value
contract issued after July 1,2015.
Public Hearing
The only witness at the public hearing, DGS Director David Dise, representing the
Executive, supported the Bill. (©13)
1
After Bill 61-14 was introduced, the Office of Procurement became a principal office in the Executive Branch
independent of the Department of General Services.
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March 19 GO Worksession
Council member Rice attended the meeting in addition to the Committee members. DGS
Director David Dise, Assistant CAO Bonnie Kirkland, Grace Denno, DGS, and Pam Jones, DGS
represented the Executive Branch. Linda Price, Legislative Analyst and Robert Drummer, Senior
Legislative Attorney, represented the Council Staff. The Committee discussed the Bill with the
Executive Branch representatives. The Committee requested comments from the MFD Task Force
before making a decision.
Issues
I. What is the fiscal and economic impact of the Bill?
The Office of Management and Budget (OMB) reports that the County currently has
approximately 85 contracts valued at more than $10 million for a total value of $2.4 billion. (©8­
12) Although OMB acknowledged that a bidder may increase the price of a bid due to the local
subcontracting requirements, OMB was unable to estimate the potential cost of these increased bid
prices. OMB estimated that the Bill would require the addition of 2 half-time employees to
implement the Program at an annual recurring cost of $79,220. The Finance Department indicated
that the Program would target approximately $270 million to local businesses, but they were
unable to estimate the economic impact on County businesses. The Fiscal and Economic Impact
Statement does not estimate the amount of high dollar value contracts currently being awarded to
local businesses.
2. Would Bill 61-14 create a preference for County businesses that would trigger a reciprocal
preference against a County business when bidding in a different jurisdiction?
Md. State Finance and Procurement Code
§
14-401 establishes a reciprocal preference for
a Maryland business against a business located in another State if that other State provides a
preference for a business located in that State. Section 14-401 provides that the State must provide
the Maryland business with the same preference offered to the out-of-State business in its own
State. According to a chart recently published by the State of Oregon, this type of reciprocal local
preference exists in 43 other States. See © 18-19. These defensive reciprocal preference laws are
designed to discourage local preference laws in other States.
Md. Local Gov't Art.
§1-402
authorizes a political subdivision of the State to give a
Maryland business a preference against a bidder from another State if the other State gives a
preference to its local businesses. Bill 49-14, Contracts and Procurement - Formal Solicitation ­
Reciprocal Local Preference, enacted on April 14, 2015, implements this State enabling act. Both
of these Maryland laws are designed to discourage local preferences in other States.
A local preference law that adds a percentage preference to a bid by a County business
against a business from another State would probably trigger a reciprocal local preference law
2
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when a Maryland business places a bid in one of the 43 other States with a reciprocal local
preference law. While some States (or Counties in Maryland) may use the local subcontracting
program that would be established by Bill 61-14 to provide a preference for local businesses in
that State, it is likely that most would not. Bill 61-14 does not discriminate against non-local prime
bidders; it favors County-based subcontractors.
3. Do other Maryland Counties have a local preference for a County-based business?
Allegany, Caroline, Cecil, Frederick, Garrett, and Prince George's counties have a local
preference law benefitting local County-based businesses in certain types of contracts. The Prince
George's County Code §10A-160 includes a 10% price preference for a County-based business.
Therefore, once Bill 49-14 takes effect on January 1,2016, the County may be required to award
a contract to a County business that is within 10% of the low bid from a Prince George's County
business. Enactment of Bill 61-14 may trigger a 10% local subcontracting requirement on a
contract in another Maryland County or in another State.
4. Does the reciprocal preference in Bill 49-14 conflict with Bill 61-14?
Bill 49-14 creates a reciprocal local preference. Bill 61-14 would create a mandatory local
subcontracting program for high value contracts. Although they can both be implemented
together, they represent conflicting policy values. Bill 49-14 is a defensive reaction designed to
discourage State and local preferences that work against a County business. Bill 61-14 is a local
preference law designed to benefit a County business at the expense of a business located outside
of the County - including a business located in a different Maryland County.
5. Are County businesses underutilized on high value contracts?
Bill 61-14 would establish a mandatory subcontracting program for local businesses that
is similar to the current MFD subcontracting program. The MFD program is designed to remedy
the effects ofpast discrimination against businesses owned by women and certain minority groups.
As discussed in the packet for Bi1l48-14, the County hired a consultant to prepare a comprehensive
disparity study to determine if MFD businesses were underutilized in County contracts and if that
underutilization can be attributed to discrimination on the basis of race, gender, or disability. A
mandatory subcontracting program for local businesses would not be based upon race or gender
and would therefore not be subject to the strict scrutiny test under the Equal Protection Clause of
the 14th Amendment. However, it would still be instructive to determine if County businesses are
underutilized on high value contracts before establishing a mandatory local subcontracting
program.
Council staff requested DGS for statistics on the number of high value contracts and the
portion of each contract that was subcontracted to a County business. See DGS Answers at ©14­
17. Unfortunately, DGS does not track data on local subcontractors. DGS told us that 23%
($167,688,239) ofthe $722 million in high value contracts were awarded to a County based prime
contractor. Several of these high value contracts were awarded to non-local businesses providing
group health insurance for County employees and retirees which may have no subcontracting
opportunities. Although we do not know, it is highly likely that more than 10% of local
3
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subcontracts on high value contracts with significant subcontracting opportunities are already
awarded to local businesses. Even if we knew how much was awarded to County subcontractors,
we do not have data on the availability of County businesses in the relevant market to determine
if they are underutilized.
6. The recommendation from the Minority Owned and Local Small Business Task Force.
The Minority Owned and Local Small Business Task Force recommended not enacting
Bill 61-14 for several reasons. See the June 3 memo from the Chair at ©20. The Task Force
pointed out that there is no evidence of underrepresentation of local subcontractors on large
contracts. They also argued that this new program would detract from the Local Small Business
Reserve Program, increase the complexity ofthe procurement system, and divert time and attention
of Procurement staff from increasing the use of local small businesses.
7. Should the Council enact Bill 61-14?
County procurement often struggles with competing purposes. First, the County has an
obligation to County residents to obtain the best goods and services from contractors for the best
possible price. This is normally served by using an open competitive process for the award of a
County contract. The County sometimes attempts to use its contracting dollars to serve a different
public purpose.
For example, the County has a Local Small Business Reserve Program that reserves certain
contracts for local small businesses. The County Procurement Law also has a Minority Owned
Business Program. Bill 48-14 will add a new requirement for contracts awarded by a request for
proposals. The County has a Prevailing Wage Law that requires a County construction contractor
to pay at least the prevailing wage set by the State. Bill 29-14, requested by the Executive, will
require County service contractors to provide additional reports on wages paid to their employees.
The County Wage Requirements Law already requires most service contractors to pay all
employees working on a County service contract at least a living wage, currently set at $14.15 per
hour. This Bill would add a new mandatory local business subcontracting requirement for high
value contracts.
Each of these procurement laws supports a strong public policy, but also runs counter to
the County's overall obligation to obtain the best goods and services for the best price. The
resulting procurement system is complicated and sometimes slow.
It
can be difficult
to
navigate.
However, each new procurement requirement adds an incremental layer of complexity.
Bill 61-14 raises some interesting policy questions. Is there a problem that needs a remedy?
We do not know! Will this make the solicitation of high value contracts more complex? Yes.
Procurement would have to certify businesses as a local business. Procurement would have to
respond to complaints about a business that was improperly certified or denied certification.
Procurement would have to audit contracts for compliance. Procurement would also have to
respond to requests for a full or partial waiver of the requirement. Finally, bidders would have to
begin to use the location of the business as part of their recruiting process along with looking for
MFD firms.
It
is difficult to see the potential benefits of this program being worth the additional
4
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complexity it would create. Council staff recommendation: do not enact this Bill and request
Procurement to begin tracking information on subcontractors on high value contracts.
8. Effective date.
The Bill, as introduced, has an effective date of July
1,2015.
If the Council enacts this
Bill, the Bill must
be
amended to change the July 1 effective date.
This packet contains:
Bill 61-14
Legislative Request Report
Fiscal and Economic Impact Statement
Testimony of David Dise
DOS Answers to Council Staff Questions
Oregon Chart of Reciprocal Local Preference Laws
Minority Owned and Small Business Task Force Memo
Circle #
1
7
8
13
14
18
20
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Business Subcontracting Program\GO Memo 9-17-1S.Docx
5
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Bill No.
61-14
Concerning: Contracts and Procurement
- Local Business Subcontracting
Program
Revised: 11120114
Draft No. 3
Introduced:
November 25.2014
Expires:
May 25.2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ _ __
Ch. _ _, Laws of Mont Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
AN
ACT to:
(1)
(2)
(3)
(4)
increase the participation of local businesses in certain large County procurement
contracts;
establish a subcontracting goal for local businesses in certain large County
procurement contracts;
establish a Local Business Subcontracting Program for certain County procurement
contracts; and
generally amend the law governing County procurement.
By adding
Montgomery County Code
Chapter lIB, Contracts and Procurement
Article XVII. Local Business Subcontracting Program
Sections 11B-78 through 11B-83
Boldface
Underlining
[Single boldface brackets1
Double underlining
[[Double boldface brackets]]
'"
'" '"
Heading or defined term.
Added to existing law by original bill.
Deietedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL No. 61-14
1
Sec.t. Sections ttB-'8, IIB-'9, IIB-80, IIB-8I, IIB-82, and IIB-83 are
added
!!
follows:
Article XVll. Local Business Subcontracting Program
ItB-'8. Definitions.
In this Section, the following words have the meanings indicated:
Broker
means
~
2
3
4
5
6
7
person that provides goods or services (other than real estate,
investment, or insurance sales) on
~
pass-through basis as follows:
8
9
10
ill
~
supplier of goods who:
®
does not own, operate, or maintain
~
place of business in
which goods of the general character required under the
contract are kept in stock in the regular course of
business;
11
12
13
.an
does not regularly assume physical custody or possession
of goods of comparable character to those offered to the
County, or
14
15
16
17
(g
exclusively acts as
the County; or
~
middleman in the sale of goods to
18
19
20
21
22
m
~
supplier of services who does not regularly maintain the
capability, capacity, training, experience, and applicable
regulatory licensing to directly perform the principal tasks of
~
contract with the County and must provide the principal tasks
through
~
subcontract with
~
third party.
Contract Award
means the delivery
.Qy
the County of
~
fully executed contract
23
24
to an offeror.
High Dollar Value Contract
means an initial Contract Award that is estimated
25
26
to exceed $10 million.
&
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Bill
No. 61-14
27
28
Local Business
means
~
for-profit business other than
~
broker that has its
principal place of business in the County. as further defined
Qy
Executive
Regulation, and that is certified
Qy
the Director as
provisions of this Article.
~
29
30
31
Local Business under the
Local Business Program Manager
means
~
person designated
Qy
the Director
32
33
34
35
36
to administer and monitor the Local Business Subcontracting Program.
Local Business Subcontractor
means
contract with
~
~
Local Business that enters into
~
~
Contractor to perform work related to
High Dollar Value
Contract for that Contractor.
IlB-79. Goals; applicability.
37
38
39
40
41
ill
Local Business Subcontracting Goals.
This subsection establishes the
following Local Small Business subcontracting goals:
ill
ill
at least 10% of the contract dollars awarded for each High Dollar
Value Contract should be awarded to
~
Local Business; and
at least 10% of the total dollar value of all
.High
Dollar Value
Contracts in the aggregate should be awarded to Local
Businesses.
42
43
44
.Qi)
Applicability.
The Local Business Subcontracting Program goals
~
to each High Dollar Value Contract except:
45
46
47
48
49
50
ill
ill
ill
ill
ill
grants or appropriations under Section 11B-14
ill ill
and
~
cooperative procurements under Section 11B-40;
public entity contracts under Section 11B-41;
emergency procurements under Section 11B-16; or
bridge contracts, under Section 11B-42, if the Director
determines in writing that compliance with this Article is
impractical or is outweighed
Qy
the benefits to the County of
entering into
~
bridge contract.
51
52
53
&-
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BILL
No.
61-14
54
55
56
57
58
59
llB-80. Procedures.
W
The Director, at the time of
~
solicitation, must publish notification to
businesses when the solicitation may result in
Contract.
~
High Dollar Value
.(Q)
The Director must encourage Local Business participation in applicable
High Dollar Value Contract opportunities by:
60
61
ill
adding
~
provision in
~
solicitation for
~
High Dollar Value
Contract that requires
~
Contractor to exercise good faith in its
62
63
64
65
66
effort to subcontract 10% of the dollar value of the contract to
one or more Local Businesses;
ill
requiring
~
Contractor on
~
High Dollar Value Contract to:
(A)
submit
~
Local Business subcontracting plan describing
how the Contractor proposes to meet the 10% Local
Business Subcontracting Program goal;
67
68
.an
identify, before initial Contract Award, each Local
Business with which the Contractor intends to subcontract
and the projected dollar amount of each subcontract or
percentage of the contract dollar amount allocated to each
subcontract; and
69
70
71
72
73
(Q)
promptly notify the Using Department ofany change in the
information required under (A) and
ill}
of this. subsection
during the contract term.
74
75
76
77
ill
(£)
requiring the Contractor to comply with Local Business
Subcontracting Program goals throughout the contract term.
78
A Contractor's failure to satisfy the requirements of the Local Business
Subcontracting Program, including
~
79
failure to submit documentation
80
required
Qy
the Director to show compliance, may constitute
~
breach of
tV
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BILL NO. 61-14
81
the contract for which the County may withhold payment or impose
liquidated damages, in addition to any other remedies available to the
County.
@
82
83
84
85
86
87
88
89
The Director may waive all or part ofthe Local Business subcontracting
requirements for
~
specific contract under appropriate circumstances as
established
.hy
Executive Regulation.
ill
The Director may require each Contractor and Local Business that
participates in the Local Business Subcontracting Program to provide
information concerning utilization
.hy
the Contractor of Local
Businesses in
~
High Dollar Value Contract.
90
91
IIB-8f. Regulations.
The County Executive must adopt
this Article. The regulation must include:
~
92
93
94
95
96
97
98
99
regulation,
.hy
Method
b
to implement
W
monitoring procedures to assist
~
contract administrator and the Local
~
Business Program Manager to determine compliance
Qy
with the Local Business Subcontracting Program;
Contractor
®
(£l
certification requirements for
~
business to qualify as
under this Article; and
procedures to certify or decertify
fI:
Local Business.
~
Local Business
100
101
102
103
104
105
IIB-82. No Standing to Challenge Contract Award.
This Article does not give any person, including
~
Local Business, any right or
status, including standing, to challenge the award of
~
contract or subcontract arising
from the County procurement system. The provisions of this Article are enforceable
only through the oversight function of the Chief Administrative Officer or his
designee.
106
107
IIB-83. Penalty.
W
A person must not:
(j)
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BILL
No. 61-14
108
109
ill
fraudulently obtain or retain, attempt to obtain or retain, or aid
another person in fraudulently obtaining or retaining, or
attempting
to
obtain or retain, certification as
for the purpose ofthis Article;
~
110
111
112
Local Business
ill
willfully make
~
false statement
to
~
County official or employee
for the purpose of influencing the certification of an entity as
Local Business; or
~
113
114
115
ill
fraudulently obtain, attempt to obtain, or aid another person in
fraudulently obtaining, or attempting to obtain, public monies to
which the person is not entitled under this Article.
116
117
118
119
(Q)
A violation ofthis Article:
120
121
122
123
ill
ill
is
~
class A violation; and
may disqualify the violator from doing business with the County
for!!p to
~
years.
Sec.2. Effective
Date
This Act takes effect on July 1, 2015 and applies to any High Dollar Value
Contract arising from a solicitation issued on or after July 1,2015.
124
125
126
Approved:
Craig
L.
Rice, President, County Council
127
Approved:
Date
128
Isiah Leggett, County Executive
Date
6)
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LEGISLATIVE REQUEST REPORT
Bill 61- 14
Contracts and Procurement
-
Local Business Subcontracting Program
DESCRIPTION:
Establish a goal that 10% of the dollars related to an initial
procurement contract award that is valued above $10 million should
go to a local business.
Contracts that are over $10 million are exempted from the Local
Small Business Reserve Program (LSBRP). This Bill would reserve a
portion of those contracts dollars to local businesses.
This Bill would establish a program to require each prime contractor
ofa High Dollar Value Contract to subcontract to a Local Business to
perform and receive compensation for at least 10% of the value of the
initial Contract Award.
CEX, DGS, OCA, DED
DGS personnel cost to support this program: $153,000
No economic impact
To be requested.
To
be
requested.
Grace Denno and Pam Jones, DGS
Not applicable.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Violation of this program may cause liquidated damages assessment
against the contractor.
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Local
Business Subcontracting Program\LRR.Docx
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ROCKVILLE, MARYlAND
MEMORANDUM
December 15,2014
TO:
George
Leventhal, President, County Council
FROM:
SUBJECT:
Jennifer
A.
Hughes, Director, 0
Joseph
F.
Beach. Director,
Dcp
'FEIS
for
Council Bill
61~14.
ofM
lagement
Finance
a~t
\j---""
Business Subcontracting Program
. Please find attached the fiscal and
economic
impact statements
for
the
above­
referenced legislation.
JAII:fz
cc: Bormie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy
Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public
Infomla-tion
Office
Joseph F. Beach.
Director,
Department
of
Finance
David
Platt,
Department of Finance
.David Dise, Director, Departmeut of General Services
Erika Lopez.-Finn, Office of Management and Budget
Alex Espinosa, Office of Management and Budget
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Fiscal Impact Statement
Council Bill 61-14, Local Contracts and Procurement - Local Business
Subcontracting Program.
1.
Legislative Summary
Contracts valued
at
over
$1
o
million are currently exetJlpt from the existing Local Small
Business Reserve Program (LSBRP).
The proposed legislation establishes a goal for a Contractor to subcontract with local
businesses in an
initial
contract award that is valued over $10 million and for the local
business
to
receive compensation of at least 10% ofthe value ofthe contract avvard.
There
are approximately 85 contracts with each over $10 million
in
value. The total
current value of
all
contracts over
$10
million dollars is $2.4 billion. The legislation
stipulates that 10% of the dollars related to an initial procurement contract award that
is
valued above
$10
million should go
to
Local Businesses.
2.
An estimate of changes in County revenues and expenditures regardless ofwhetber
the revenues or expenditures are assumed
in
the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
No revenues are expected from the proposed legislation.
Expenditures related to the proposed legislation are difficult
to
estimate. There
is
a
potential for bidders or offerors
to
build their increased costs resulting from use oflocal
subcontractors into their
r'dtes
or prices offered
to
the County. The cost increase to the .
County cannot be estimated at this time.
3. Revenue and expenditure estimates covering at least the next 6
IlScal
years.
See item
#2.
4. An actuarial
analysis
through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
111e proposed legislation does
not
affect retiree pension or group insurance costs.
S.
An estimate of expenditures related to County's information technology
(IT
systems),
including Enterprise Resource Planning (ERP) systems.
The proposed legislation's expenditures will not affect ERP systems.
6.
Later actions that may affeet
future
re,\,enue and expenditures
if
the bill authorizes
future spending.
The proposed legislation does not authorize
future
spending.
(j)
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7.
An estimate of the staff time needed to implement the bill.
OOS estimates
thai
one
(1.0) PTE
is
necessary
to
implement
this
legislation for a total
annual cost of $79,220 per year
l
plus associated expenses of$5,468, for a
total
first-year
cost ofapproximately $84,688.
One half (0.5) .FTE is for a
Local
Business Program Manager (Grade 23) with a financial
background is needed
to
review vendors' eligibility, conduct site visits, validate
compliance, compile reports, and conduct outreach at $42,813 per year. DGS estimates
associated operating expenses for the position at $2,734.
2
One half
(0.5) FTE
for a Procurement Specialist (under-filled
at
Grade 16)
to
analyze bid
and proposal submissions related to additional solicitation and contract compliance
requirements, coordinate with the Office ofBusiness Relations and Compliance (OBRC)
and Contract Administrators (CA) related to local business eligibility and applicability, to
issue, approve and track legally required determination and finding recommendations under
the
Procurement process, to report, as needed or required and CA training
at
$30,940 per
year.
DGS
estimates associated operating expenses for the position $2,734.
8. An
explanation of how the addition of new
staff
responsibilities would
aticet
other
duties.
The Program Manager
is
needed for OBRC to manage this new program to review
vendors' eligibility, conduct
site
visits, validate compliance, review reports. conduct
outreach; and provide training.
The
Procurement Specialist (Expeditor)
win
solely
focus
on minimizing delays
that
the
new program may cause. The existing Procurement resources
will
not be able to cover the
new additional tasks for this program, including: review bid/proposal submissions,
determine for variances
in
application of law, track and report, and train Contract
Administrators.
9. An estimate of costs when an additional appropriation is needed.
An appropriation of$79,220
is
needed
in
the
first year ofthe proposed bill's
implementation. On-going personnel wou,ld require an appropriation of $79,220 for the 1.0:
combined
F T R . ;
.
10. A description
of
any
variable that could affect revenue and cost estimates.
Assumes compensation
(salary
and benefits of25%)
at
the mid-point ofgrade.
2
Assumes a
desktop
compurerwith MS Office ($1,074 one-time), phone expenses ($660 per
ye;:rr).
and
initial
furniture
($1,000
one-time).
1
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There is a
potential
for Bidders or Offerors to build their increased costs resulting from use
oflocal subcontractors into their rates or offers
to
the County. The cost increase to the
County cannot be estimated at this time.
11.
Ranges
of revenue or expenditures that are
llncertain
or difficult to project.
See item #2.
12.
If
a bill is
likely
to
have
no fiscal impact,
why
that
is
the
case.
Not applicable.
13.
Other
flSeal impacts or
comments.
None
14. The following contributed to and concnrred with this analysis:
Grace Denno, OffICe ofBusiness Relations and Compliance, Department of General Services
Pam Jones, Office of Procurement, Department of General Services
Beryl
Feinberg, Department ofGeneral Services
Angela Dizelos. Department of General Services
Erika Lopez-Finn, Office of Managernent and Budget
-'2l1m4-,--,
Date
1/
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Economic Impact Statement
Bill 61-14, Local Business Subcontracting Program
Background:
This
legislation would establish
a
goal
that
ten percent (1
()<I/o)
of an
initial
procurement
contract award above
$10
million should
go to local businesses. Under the
proposed
legis1atio~
therefore,
the
prime
c.ontractor would subcontract with
local
businesses
in
an jnitialaward of the
contract
value over $10 million and local
businesses
would
receive
compensation
for
at least ten
percent
(10%) of the value of
the
contract.
1. The sources
ofinformation~
assumptions, and methodologies used.
Source ofinformation
is
the Officc
of Business
Relations and Compliance (OBRC),
Department ofGeneral Services (DOS).
According to
OBRC, there
were
eighty­
four
(84)
contracts
awarded
with
a value
of over
$lO
million.
The
total value
of
these contracts
was $2.37 billion. Based on the above data, approximately $237.0
million
is targeted to
be
awarded
or subcontracted to local
businesses.
2. A description of any variable that could affect the economic impact estimates.
The variables that
could
affect the
economic
impact
estimates
are
the
number of
contracts
awarded
with a
value
of over
$10
million and
the difference
in
contracts
awarded to local
businesses compared
to
previous
years.
3. The Bill's positive or negative effect,
if
any on employment, spending, sa\ing,
investment, incomes, and property values in the County.
The legislation would have
an
economic impact on business revenues
and
a
possible increase
in
local
employment,
incomes~
and investments. However,
without
specificity
of
data
regarding cmploymt.'Ilt and
business
expansion
by
the
local businesses
and
baseline data on current awards it is difficult to specifically
quantify
the change in the economic impact.
4.
If
a Bill is likely to have no economic impact, why is that the
ease?
See paragraph #3.
5. The following contributed to or concurred
with
this analysis: David Platt and
Rob
Hagedoom, Department of Finance; and Grace Denno,
Office
of Business
Relations
and
Compliance,
Department of
General
Services.
~~lD~
partment
of Firull1ce
Page 1of 1
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I~
TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAH LEGGETT
ON LOCAL BUSINESS SUBCONTRACTING
BILL 61-14
January 13,2015
I am David Dise, Director of Montgomery County's Department of General Services.
I am pleased to testify on behalf of County Executive Isiah Leggett in support of Bill
61-14, Local Business Subcontracting Program, introduced November 21, 2014, by
then Council President Rice. Mr. Leggett thanks Councilmember Rice's support in
this effort to address the ongoing need to support and increase local business access to
County contracting opportunities.
This Bill establishes a local business subcontracting goal for companies acting as
prime contractors on large County contracts. The current Local Small Business
Reserve Program (LSBRP) reserves qualifying County contracts
under
$10 million to
local small business competition. This Bill will provide increased opportunity to all
Montgomery County based businesses by ensuring some measure of participation on
County contracts valued
over
$10 million, which includes contracts for engineering
and architectural design, construction services, insurance, health and human services,
IT commodities and services, trash/recycling collecting services, custodial services,
storm water management services, and transportation services.
In
FY15 to-date Montgomery County has contracted for $722 million in goods and
services through contracts over the $10 million threshold. While the percent of local
business participation in FY15 is 23%, the participation rate varies from year to year,
as it does with the type of contract; such as construction or professional services. This
legislation will ensure opportunity across
all
business categories as well as establish a
minimum participation rate to ensure continuity of opportunity in future years.
Montgomery County has a robust, active and responsive local business community.
These businesses employ local residents, provide good jobs, and are foundational to
the local economy. This bill will ensure more opportunities for local bus.inesses while
maintaining healthy competition and ensuring the best value for the expenditure of
public funds.
County Executive Leggett applauds the Council's support and recognition ofthe.need
to support the local
bus~ess
community and strengthen the local economy through
this legislation.
1
@
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1. In your testimony at the public hearing you stated that 23% of the $722 million in contracts
valued at more than $10 million went to local businesses. Does the 23% include awards to a
local prime contractor or just subcontracts?
This 23% ($167,688,239) actually is the local vendors who are primes. we currently do not track
data on local subcontractors.
Here is the breakdown:
For FY15, 2 new construction projects were awarded to local vendors for a total of $84,755,000 to local
businesses
Montgomery County Multi-
Agency Service Park Public
Safety Training Academy
Residential Road Resurfacing
- Primary award
Hess Construction
+
Engineering Services,
Inc.
Francis O. Day Co., Inc.
CONST
CONST
RFP
IFB
14-Nov-14
24-Dec-14
$68,755,000.00
$16,000,000.00
For FY15, the routine contracts below were expired and re-awa rded, at a total of $82,933,239
2. Please provide a list of each contract awarded in FY 14 valued at more than $10 million,
including the type of goods or services provided. For each contract, please provide the percent
of the contract subcontracted to local businesses and the overall amount of the contract
awarded to local businesses including the prime contractor.
We currently do not track local subcontracting informati.on. Contracts awarded to local
businesses, as prime contractors, are highlighted in
yellOW
in the chart below and represents 7%
of these dollars ($35.87m/$479.4m). The chart below lists all FY14 contracts over $10 million:
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1030764
Pre
Plan
Group
Hospitalization and
Medical Services,
Inc,
Northbrook
IL
Point-of-Service
Plans, Retiree
1030769 Indem
Plan
Fully-Insured
Staff Model
Health
Maintenance
Organization
1030766 Medical Plan
Montgomery
County Public
Schools (MCPS)
Food Distribution
1027827 Relocation
Computer Aided
Dispatch (CAD)
1040850 Modernization
Kaiser Foundation
Health Plan ofthe
Mid-Atlantic States,
Inc.
Owin Mills
Rockville (does
not meet
County's
definition of
Local
Business)
MD
21-Jan-14
MD
03-Feb-14
Costello
Construction Of
Ma
Inc.
Motorola Solutions,
Inc.
Columbia
MD
lO-$e
13
37,
Schaumbu
IL
27-Jun-14
28925629
1030767
1039448
Provider Option
Medical Plan
North Potomac
Community
Recreation
Center
United HealthCare
Inc.
Servi
Hartford
CT
03-Feb-14
Dustin
Construction, Inc.
Washington Gas
MD
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1035901
Self Insured PPO
Type Dental
Benefits and
Related
Administrative
Services
Design, Build,
Operate and
Maintain two
CNG facilities at
the County
EMOC
Engineering
Services for
Tra nsportation
Design
&
Planni
United Concordia
Companies, Inc.
d/b/a United
Concordia Dental
Hunt Valley
MD
15-Jan-14
1033010
Integrys
Transportation
Fuels, d/b/a
Trillium CNG
Salt Lake
UT
28-Feb-14
.00
1011775
Total
The Wilson T
Ballard Com
Mill
MD
29-Mar-14
000.00
479,419,441.48
3. Please provide a total percent of subcontracts awarded to local businesses for FY 14 on these
high value contracts and a total percent of contracts awarded to local businesses as either a
prime or subcontractor.
We currently do not track local subcontractors. Data is currently available on local prime
contractors; see item 2 for FY14 data.
4. Please provide the same statistics for FY15.
Data is currently available for local prime contractors, see item 1.
5. What is the explanation for requiring 10% of each contract to be subcontracted to local
businesses as opposed to 5% or 20%?
Many subcontracting programs (Minority, Small or Local subcontracting programs) throughout
the country use 10% as a starting point. Since no study has been done in Montgomery County
on local subcontracting disparities, the County selected the 10% based common practice.
A survey was done on major construction projects for FY12 and FY13. It shows 28%-29% local
spending (see below):
Total Procurement
FY 12
FY 13
$762,811,116
$845,361,770
Local Prime+Sub
$220,034,639
$233,701,295
% local
29%
28%
Although construction projects count for the majority of the contracts over $10 million and
usually provide great opportunities for local subcontracting, there are other categories such as
"county employee health insurance", ((prescription plan" and "dental benefits" which generally
have close to 0% subcontracting for local businesses; see
highlights under item 2. These
contracts (that have close to 0% local subcontracting opportunities) count for $299M, or 62% of
III
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the total contract amount in FY14. The rest of the contracts are construction and IT related,
count for $180M. Assuming construction and IT contracts provide 30% of local subcontracting
($54M available for local subcontracting), for overall contracting amount it is 11%.
($54,OOOM/$479,000M)
6. What is the percent of local businesses compared to the total number of businesses in each
industry we award these high value contracts? Do you have any evidence of underutilization of
local businesses in these contracts based upon their availability in the marketplace?
In FY14, 2 out of 14 contracts over $10mm were awarded to local businesses. This represents 14%
of the contracts awarded.
Please let me know if you have any question.
Best Regards,
Grace
Denno
Manager
I
Office of Business Relations and Compliance
Department of General Services
I
Montgomery County MD
255 Rockville Pike, Ste. 180
I
Rockville, MD 20850
P 240-777-9959
I
F 240-777-9952
grace.denno@montgomervcountymd.gov
www.montgomerycountymd.gov/OBRC
THINK BEFORE YOU PRINT
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3/16/2015
Procurement Services and Policy State by State Preference Data (as submitted by each state)
-(
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DAS Divisions
State by State Preference Data (as submitted by each state)
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Preference:
Reciprocal Preference
Enterprise Goods and
Services Home
Procurement Services
and Policy Home
Preference is any advantage given to offerors in a competition for contract award which
may
be granted based on pre­
established criteria. These criteria are established
by
Law.
Law is mandatory; is defined
by
Statute, Rule, Statewide Policy, Executive Order; and is what gives
you
Preference
Authority. Use of the preference
may
be identified as either Mandatory or Discretionary.
Reciprocal Preference:
An advantage a state applies in order to match a preference given
by
another state.
For Example: A preference based on residency.
State
Preference
law/Statute
Tie-Bid
Preference
Reciprocal
Preference
Preference Conditions
Including Law Citation
Date of Verification
Alabama (Al)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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Yes
None
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Details
Details
Details
Details
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Details
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Details
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Details
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July
January
December
February
January
2014
2013
2014
2013
2015
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Nebraska (NE)
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Procurement Services and Policy State by State Preference Data (as submitted by each state)
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Yes
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Yes
Yes
Yes
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Yes
None
Yes
Yes
None
Yes
Yes
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Yes
Yes
None
Yes
Yes
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None
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I
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!~ll..
L
~/·
iLl
MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAN D
RECEIVED
MINORITY OWNED AND LOCAL SMALL Bu._.laiW&ltE
June 3, 2015
The Honorable George Leventhal
Council President
Montgomery County Council
Council Office Building
100 Maryland Avenue
t
5
th
Floor
Rockville, MD 20850
Dear Council President Leventhal:
On behalfofthe recently appointed Montgomery County Minority Owned and Local Small
Business Task Force, we take the following position as it relates to Bill 61-14. The proposed
legislation seeks to establish a Local Business Subcontracting Program requiring
I
()o1o
of high
value contracts pegged at greater than $10 million to be subcontracted to local businesses.
Position
1.
It
is our understanding that the preparation and introduction ofMontgomery County
Council Bills occur as a result of identified and substantiated problem areas. Bill
61-14 appears not to be based on a rigorous analysis of relevant historical contract
data to warrant legislation of this magnitude. While occasional anecdotal evidence
is available, it does not rise to the level sufficient to enact legislation at this time.
2.
It
is further our position that
Bill
61-14 detracts from
the
County's Local and
Small
Business Reserve Program (LSBRP) by creating additional workload for the Office
of Procurement. Increased workload would take the form of local business
certification and tracking. Additionally, time and attention to the LSBRP would
lessen as a result.
ou for giving the Task Force an opportunity to express our views.
erman Taylor
'Chair, Minority Owned and Local Small Business Task Force
Cc:
Councilmember Nancy Navarro, Chair, Government Operations and Fiscal Policy Committee
tOO MARYLAND AVENUE • ROCKVILLE, MARYLAND 20850
STELLA B. WERNER COUNCIL OFFICE BUILDING •
2401777-7900
TTY 240/777-7914 • FAX
2401777-7989
WWW.MONTGOMERYCOUNTYMD.GOV
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