GO Item 3
April 4, 2016
Worksession 3
MEMORANDUM
March 31,2016
TO:
Goverrunent Operations and Fiscal Policy Committee
FROM:
SUBJECT:
Robert H. Drummer, Senior Legislative
AttO=M
Worksession 3:
Bill 61-14, Contracts and Procurement - Local Business
Subcontracting Program
Expected attendees:
Cherri Branson, Director of Procurement
Pam Jones, Procurement
Grace Denno, Procurement
Bonnie Kirkland, Assistant CAO
Bill 61-14, Contracts and Procurement - Local Business Subcontracting Program,
sponsored by Lead Sponsor COWlcil President at the request of the COWlty Executive, was
introduced on November 25, 2014. A public hearing was held on January 13 and Goverrunent
Operations and Fiscal Policy Committee worksessions were held on March 19 and September 17.
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! 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, as introduced, would take effect on July 1,2015 and apply to a solicitation for a
high dollar value contract issued after July 1,2015.
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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Public Hearing
The only witness at the public hearing, DOS Director David Dise, representing the
Executive, supported the Bill. (©13)
March 19,2015 GO Worksession
Councilmember Rice attended the meeting in addition to the Committee members. DOS
Director David Dise, Assistant CAO Bonnie Kirkland, Orace Denno, DOS, and Pam Jones, DOS
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.
September 17,2015 Worksession
Procurement Director Cherri Branson, Assistant CAO Bonnie Kirkland, Grace Denno,
Procurement, and Pam Jones, Procurement, represented the Executive Branch. Robert Drummer,
Senior Legislative Attorney, represented the Council Staff. The Committee discussed the need for
more information on the percentage of large contracts already being subcontracted to local
businesses with the Procurement Staff and the recommendation from the MFD Task Force to not
enact the Bill at this time. Ms. Branson told the Committee that Procurement has not had the time
to analyze the need to help local businesses that size out ofthe LSBRP. The Committee requested
Procurement to do this
analysi~
within the next 6 months.
Issues
1.
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 Executive'S recommended
FY17 Operating Budget does not include these additional positions for the Office ofProcurement.
2
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.
The Executive's recommended FY17 Operating Budget would add only one administrative specialist to the Office
of Procurement.
2
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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 § 14-40 1 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
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 §lOA-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.
3
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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 Bill 48-14, the County hired a consultant to prepare a comprehensive
disparity study to determine ifMFD 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 ofeach 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.
After the last worksession, Procurement reviewed the contracts valued at more than
$10,000,000 that were awarded in FY14 and FY15 and produced a chart showing each contract
awarded, the contract's eligibility for a local subcontracting requirement, and the actual local
subcontracting promised. See ©21-23. Excluding contracts that would not be eligible for a local
subcontracting requirement under Bill 61-14, the County awarded 9 contracts for a total value of
$186,186,744 during this time period. Four ofthe 9 contracts included local subcontracting greater
than 10%. The total amount subcontracted to local firms was $16,792,750 or 9%. We have no
information about what percentage of the relevant markets consist of local contractors, and
therefore, can draw no conclusions as to whether the achieved percentage represents
underutilization or over-utilization of local contractors.
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. Does Procurement have sufficient staff to implement this Bill along with other recently
added responsibilities?
4
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Here is a chart showing recently enacted procurement laws and the new positions that
should be added to implement the law.
Status
Enacted Legislation
Bill 14-14 - Health Insurance Requirements
Bill 48-14 - Minority Owned Business Procedures
Bill 23-15 - Local Small Business Reserve
Amendments
Bill 29-14 - Wage Reporting
Bill 49-14 - Reciprocal Local Preference
BillS-IS - Health Insurance Preference
BiI143-15 - Wage Requirements - Amendment
Pending Legislation
Bill 61-14 - Local Business Subcontracting Program
Pending
$79,220
1.0
Funded
No bnpact
No Impact
Unfunded
Unfunded
Unfunded
Unfunded
Expense
FTE Proc.
$101,468
$0
$0
$101,468
$85,626
$85,946
$288,468
1.0
0.0
0.0
1.0
1.0
1.0
2.0
According to the fiscal impact statements, recently enacted procurement laws require 6
additional positions to implement. Only I of these 6 positions was funded in FYI6. The
Executive's recommended FY17 Operating Budget would add only 1 new administrative specialist
position to the Procurement Staff. Bill 61-14 would require 2 half-time positions to implement.
Although the Office of Procurement would implement this Bill if it is enacted, it is likely to divert
their time and attention from their other responsibilities.
8. Does Bill 61-14 conflict with the recommendations made
by
the Procurement Policies and
Regulations Task Force?
The Procurement Policies and Regulations Task Force made the following
recommendation:
1.
ClarifY County procurement preferences.
The Task Force observed that it is difficult to reconcile competing preference
programs in a given procurement. Competing preferences would be reconciled
on a contract-by-contract basis. Procurement currently administers four
preference programs, which include a local tie-breaker preference, a reciprocal
local preference, a preference for small businesses certified as offering health
insurance; and an evaluation factor for purchases from minority owned
businesses. This
is
one example that reinforces the perceptions illustrated in
survey responses that County contracting
is
unfair and that the social
preference programs may have overcome business considerations in County
procurement. Accordingly, metrics must be developed to determine
if
desired
results are being achieved in preference programs, social policies, process
improvements, productivity and financial metrics.
A moratorium should be
placed on additional changes
ro
County procurement process, to include additional
5
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preferences or social responsibility programs and provisions, until those metries are
established to determine
if
desired results are being achieved.
(emphasis added)
Bill 61-14 would add another preference to the already confusing procurement matrix.
9.
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. Does the Executive's FY17
recommended Operating Budget include the additional Procurement office staffmg needed to
complete these new tasks? No. 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 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.
6
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8. Effective date.
The Bill, as introduced,
has
an effective date of July 1,2015. lfthe Council enacts this
Bill, the Bill must be amended to change the July 1 effective date.
This packet contains:
Bil161-14
Legislative Request Report
Fiscal and Economic Impact Statement
Testimony of David Dise
DGS Answers to Council Staff Questions
Oregon Chart of Reciprocal Local Preference Laws
Minority Owned and Small Business Task Force Memo
Chart of Large Contracts Awarded in FY14 and FY15
Circle
#
1
7
8
13
14
18
20
21
'P:\LAW\BILLS\l461 Local Business Subcontracting Program\GO Memo 3, 4-4-16.Docx
7
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Bill No.
61-14
Concerning: Contracts and Procurement
- Local Business Subcontracting
Program
Revised:
11120/14
Draft No. 3
Introduced:
November 25, 2014
Expires:
May 25, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _---:-:--_ _ _ _ _ __
Sunset Date: --'-'N=onc:..=e"":-----::--_ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: 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 IIB-78 through IIB-83
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom 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 thefollowing Act:
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BILL
No. 61-14
1
Sec.!. Sections IIB-78, IIB-79, IIB-80, IIB-81, IIB-82, and IIB-83 are
added
!!!,
follows:
Article XVll. Local Business Subcontracting Program
IIB-78. Definitions.
In
this Section, the following words have the meanings indicated:
Broker
means
~
2
3
4
5
6
7
8
9
10
person that provides goods or services (other than real estate,
investment, or insurance sales) on
f!
pass-through basis as follows: .
ill
f!
supplier of goods who:
(A) does not own, operate, or maintain
f!
place of business in
which goods of the general character required under the
contract are kept in stock in the regular course of
business;
ill)
does not regularly assume physical custody or possession
11
12
13
14
15
16
17
18
19
of goods of comparable character to those offered to the
County, or
©
exclusively acts as
f!
middleman in the sale of goods to
the County; or
ill
a
supplier of services who does not regularly maintain the
capability, capacity, training, experience, and applicable
regulatory licensing to directly perform the principal tasks of
f!
contract with the County and must provide the principal tasks
through
f!
subcontract with
f!
third party.
Contract Award
means the delivery
Qy
the County of
f!
fully executed contract
20
21
22
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
29
Local Business
means
~
for-profit business other than
~
broker that has its
principal place of business in the County, as further defined
by
Executive
Regulation, and that is certified
by
the Director as
provisions ofthis Article.
Local Business Program Manager
means
~
person designated
by
the Director
~
Local Business under the
30
31
32
33
34
35
to administer and monitor the Local Business Subcontracting Program.
Local Business Subcontractor
means
~
Local Business that enters into
~
~
contract with
~
Contractor to perform work related to
High Dollar Value
Contract for that Contractor.
36
37
38
llB-79.
Goals; applicability.
W
Local Business Subcontracting Goals.
This subsection establishes the
following Local Small Business subcontracting goals:
39
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.
40
41
42
43
44
(hl
Applicability.
The Local Business Subcontracting Program goals apply
45
to each
High
Dollar Value Contract except:
46
47
48
ill
ill
grants or appropriations under Section IIB-14
will
and
8:.t
cooperative procurements under Section 11B-40;
public entity contracts under Section 1IB-41;
emergency procurements under Section IlB-16; or
bridge contracts, under Section
IlB-42, if the Director
ill
®
ill
49
50
51
52
53
determines in writing that compliance with this Article is
impractical or is outweighed
by
the benefits to the County of
entering into
~
bridge contract.
0-
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BILL
No. 61-14
54
55
56
57
58
59
60
61
62
63
64
65
66
IIB-80. Procedures.
Uti
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:
ill
adding
~
provision in
~
~
solicitation for
~
High Dollar Value
Contract that requires
Contractor to exercise good faith in its
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:
CA)
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 proiected 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 of any change in the
information required under CA) and
during the contract term.
74
75
an
of this. subsection
76
77
78
ill
requiring the Contractor to comply with Local Business
Subcontracting Program goals throughout the contract term.
ill
A Contractor's failure to satisfy the requirements of the Local Business
Subcontracting Program, including
~
79
80
failure to submit documentation
required
Qy
the Director to show compliance, may constitute
~
breach of
o
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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
90
91
92
93
94
95
The Director may waive all or part ofthe Local Business subcontracting
requirements for
f!
specific contract under appropriate circumstances as
established
by
Executive Regulation.
W
The Director may require each Contractor and Local Business that
participates in the Local Business Subcontracting Program to provide
information concerning utilization
by
the Contractor of Local
Businesses in
f!
High Dollar Value Contract.
IlB-81.
Regulations.
The County Executive must adopt
f!
regulation,
by
Method
this Article. The regulation must include:
b
to implement
ill
monitoring procedures to assist
f!
contract administrator and the Local
Business Program
Man~er
to determine compliance
by
f!
Contractor
96
97
98
99
100
101
102
103
104
105
106
107
with the Local Business Subcontracting Program;
ru
!£)
certification requirements for
f!
business to qualify as
f!
Local Business
under this Article; and
procedures to certify or decertify
f!
Local Business.
IlB-82.
No Standing to Challenge Contract Award.
This Article does not give any person, including
f!
Local Business, any right or
status, including standing, to challenge the award of
f!
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.
IlB-83.
Penalty.
ill
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
f!
Local Business
for the purpose of this Article;
110
111
112
113
114
115
116
117
ill
willfully make
f!
false statement to
f!
County official or employee
for the purpose of influencing the certification of an entity as
f!
Local Business; or
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.
118
119
120
121
(Q)
A violation ofthis Article:
ill
ill
is
f!
class A violation; and
may disqualify the violator from doing business with the County
for
!ill
to
2
years.
122
123
124
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.
125
Approved:
126
Nancy Floreen, President, COlmty Council
127
Approved:
Date
128
Isiah Leggett, County Executive
Date
@
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LEGISLATIVE REQUEST REPORT
Bi1l61- 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
of a High Dollar Value Contract to subcontract to a Local Business to
perform and receive compensation for at least 10% ofthe 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
WITIDN
MUNICIPALITIES:
PENALTIES:
Violation of this program may cause liquidated damages assessment
against the contractor.
F:\LAW\BILLS\)46I
Local
Business Subcontracting Program\LRR.Oocx
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ROCKVILLE, MAR11Al'JD
MEMORANDUM
December 15, 2014
TO:
George Leventhal, President, County Coun.cil
Jennifer
A.
Hughes, Director,
Q -
Joseph F. Beach, Director, Dcp
PElS for Council Bil16l
~
14, Loea1 Business Subcontracting Program
Please find attached the fiscal and economic impact statements for the above­
~
~
FROM:
SUBJECT:
referenced
legislation.
JAH:fz
cc: Bonnie Kirkland,
Assi~tant
Chief
Administrative
Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public h\formation Offic.e
Joseph
F.
Beach., Director, Department of Finance
David
Platt,
Department of
Finance
David
Dise, Director, Department of (':renera) 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, LQcal
Contracts
and
Procurement - Local Business
Subcontracting Program
1.
Legislative Summary
Contracts valued
at
over S10 million are currently exempt 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 ofat least 10% of the value ofthe contract award.
'There
are approximately 85 contracts with each over S10 .million
in
value. The total
current value of all contracts over S10 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 S10 million should go
to
Local
Businesses.
2.
An estimate of changes
in
County revenues and expenditures regardless ofwhether
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 rates 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
le-.tSt
the
next
6
fIScal
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.
The proposed legislation does not affect retiree pension or group insurance costs.
S.
An
estimate of expenditures related to County's information teehnology
(IT
systems),
including Enterprise Resource Planning (ERP) systems.
The proposed legislation's expenditures will not affect ERP systems.
6. Later actions that may affect
future
revenue and expenditures if the bill authorizes
future spending.
The proposed legislation does not
authorize
future
spending.
9
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7.
An
estimate of the staff time needed to implement the bID.
DOS estimates
thai
one (l.0) .tIE 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
of approximately $84,688.
One half (O.5)FTE is for aLoca1 Business Program Manager (Grade 23) vvith 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 v.rith the Office of Business 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 affect 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) vvill solely focus on minimizing delays that the
new program may cause, The existing Procurement resol.lrCes
will
not be
able
to cover
the
new additional tasks for this program, including: re'view bid/proposal submissions,
determine
for
variances
in
application of law, track and
r'-1J011,
and
train
Contract
Administrators.
9.
An
estimate of costs when an additional appropriation is needed.
An
appropriation 0[$79,220
is
needed
in the first
year
of the
proposed bill's
implementation. On-going personnel wou).d require an appropriation of $79,220 for the 1
..
combined FTE.
"
10. A description of any variable that could affect revenue and cost estimates.
Assumes cumpensation
(salary
and benefits of25%)
at
the mid-point ofgrade.
2
Assumes a desktop computer
With
MS Office ($1,074 one-time). phone expenses ($660 per year), and initial
furniture ($1,000 one-time).
I
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There
is
a potential for Bidders or Offerors to build their increased costs re:l-ulting
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
o{ revenue or expenditures that are uncertain or difficult to project.
See item
#2.
12.
If
a
bill
is
likely
to
have no
fiscal impact,
why
that
is
the
ease.
Not applicable.
13. Other fiscal impacts or comments.
None
14.
The fonowing eontributed to and concurred
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 Management and Budget
J2)J5/14
Date
1/
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Eeonomic Impact Statement
Bill 61·14, Local Business Subcontracting Program
Background:
This legislation would establish a goal that ten percent (10%) of an initial procurement
contract award above $10 million shou1d go to local businesses. Under the proposed
legislatio~
therefore.
the
prime contractor 'would subcontract with local businesses in
an initial award of the contract value over
$10
million
and local businesses wou1d
receive compensation for at least ten percent (10%) of the value ofthe contract.
1.
The sources of
intormation~
assumptions, and methodologies used.
Source ofinformation is the Office of Business Relations and Compliance (OBRC),
Department of General Services (DGS). According to OBRC.
there
were eighty­
four (84) contracts awarded with a value of over $10 million. 'The total value of
these contracts was $2.37 billion. Based on the above data. approximately $237.0
million
is
targeted to
bt!
awarded or subcontracted to local businesses.
2. A
description of
any
variable that could affect the eeonomic impact estimates.
The variables that could affect the economic impact estimates
are
the number of
contracts awarded with a value ofover $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, saving,
investment, incomes, and property values in
the
County.
The
legislation would have
an
economic impact on business revenues and
a
possible increase in local emplo)1Dent, incomes, and investments. However,
·without
specificity
of data regarding employment 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
case?
See paragra.ph #3.
5. The
following contributed to or concurred with this analysis: David Platt and
Rob Hagedoorn, Department ofFinance; and Grace Denno, Office of Business
Relations and Compliance, Department
of
General Services.
. Datel
Page
1
of 1
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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 FYl5 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 businesses 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.
@
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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-awarded, 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 information. Contracts awarded to local
businesses, as prime contractors, are highlighted in
~~Hbw
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
n Plan
Group
Hospitalization and
Medical Services,
Northbrook
IL
21-Jan-14
Point-ot-Service
1030769
Fully-Insured
Staff Model
Health
Maintenance
Organization
Medical Plan
Montgomery
County Public
Schools (MCPS)
Food Distribution
Relocation
Computer Aided
Dispatch (CAD)
Modernizatio n
Mills
Rockville
(does
Kaiser Foundation
Health Plan ofthe
Mid-Atlantic States,
Inc.
not meet
County's
definition of
Local
Business)
MD
21-Jan-14
1030766
MD
03-Feb-14
1027827
Costello
Construction
ot
Ma
Inc.
Motorola Solutions,
Inc.
Walsh Construction
II, LLC
Columbia
MD
10-Se
13
37,
000.00
1040850
Schaumbu
IL
27-Jun-14
28925629
1030767
1039448
Provider Option
Medical Plan
North Potomac
Community
Recreation
Center
United HealthCare
Services, Inc.
Hartford
CT
03-Feb-14
Dustin
Construction, Inc.
Washington Gas
Energy Services,
Inc.
MD
18,932,000.00
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1035901
1033010
1011775
Total
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
Transportation
Design
&
Planni
United Concordia
Companies, Inc.
d/b/a United
Concordia Dental
Hunt Valley
MD
15-Jan-14
Integrys
Transportation
Fuels, d/b/a
Trillium CNG
Salt Lake
UT
28-Feb-14
10,500,000.00
The Wilson T
Ballard Compa
Mill
MD
29-Mar-14
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
FY13
$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,OOOM)
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.de nno@montgomervcountymd.gov
www.montgomerycountvmd.gov[OBRC
THINK BEFORE YOU PRINT
@)
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3/1612015
Procurement Services and Policy State by State Preference Data (as submitted by each state)
Find
~
Hi
Policy
DAS Divisions
State by State Preference Data (as submitted by each state)
Contact Us
About Us
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)
@
http://www.oregon.gov/DAS/EGS/ps/Pages/detail_a_main_page.aspx
1/3
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3/1612015
Procurement Services and Policy State by State Preference Data (as submitted
by
each state)
N/A
None
Tennessee (TN)
Texas (TIC)
Utah (UT)
Vermont (VT)
i
Virginia (VA)
Washington (WA)
I
Yes
Yes
No
, Washington DC
(District of
Columbia)
West Virginia (WV)
Wisconsin (WI)
, Wyoming (WY)
Yes
Yes
No
OREGON.GOV
Stale Directories
Agencies A to Z
Oregon Administrative Rules
Oregon Revised Statutes
Oregon· an Equal Opportunity
Employer
About Oregon.gov
WEB SITE LINKS
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Accessibi Rty
Oregon.gov
File Formats
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Web Site Feedback
PDF FILE ACCESSIBILITY
Adobe Reader, or equivalent, is required to
view PDF
files.
Click the
"Get
Adobe Reader"
image to get a free download of the reader from
Adobe.
htt :/Iwww.ore on. oy/DAS/EGS/ s/Pa es/detail a main
a e.aspx
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MONTGOMERY COUNTY COUNCil
ROCKVILLE. MARYLAND
1ms
~1tt
-
Q
l.ti
8:
32
MINORITY OWNED AND LOCAL SMALL
Bu~.ai't'&ltE
RECE 1VE
2.
June 3, 2015
The Honorable George Leventhal
Council President
Montgomery County Council
Council Office Building
100 Maryland Avenue, 5
th
Floor
Rockville, MD 20850
Dear Council President Leventhal:
On
behalf ofthe 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 10% 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 ofthis 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
240n77-7900
STELLA B. WERNER COUNCIL OFFICE BUILDING·
100
MARYLAND AVENUE • ROCKVIL.LE, MARYLAND
20850
TTY
240n77-7914
FAX
240n77-7989
WWW.MONTGOMERYCOUNTYMD.GOV
PRINTED ON RECYCLI!O PAPER
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FY14 contracts over $10 million
Current Local
participation
MD prime,
17% local sub
Estimated
Amount
37,790,000.00
22,989,000.00
18,932,000.00
13,052,000.00
Loca :' ,:
i','
Subcontracting<';,
construction ­
>100/&..(17%);
" I
·/I~'~';
CONTRACT
#
1027827
1038489
1039448
1027826
CONTRACT DE$C
Montgomery County Public Schools (MCPS)
Food Distribution Relocation
Dennis Avenue Health Center
Nortl'! Potomac Community Recreation Center
Public Safety (PSTA)
&
Multi Agency Service
Park - Site Development
Health Care Services for Low Income,
Uninsured Adults (Montgomery Cares)
Prescription Plan
Point-of-Service Plans, Retiree Indemnity Plan
Fully-Insured Staff Model Health Maintenance
Org~nization
Medical Plan
Self-Insured Extended Provider Option
Medical Plan
Self Insured PPO Type Dental Benefits and
Related Administrative Services
Computer Aided Dispatch (CAD)
Modernization
Firm Natural Gas Supply
Design, Build, Operate and Maintain two CNG
facilities at the County EMOC
Engineering Services for Transportation
Design
&
Planning
VENDOR
Costello Construction Of
Maryland, Inc.
Walsh Construction
Company II, LLC
Dustin Construction, Inc.
Pleasants Construction,
Inc.
Primary Care Coalition of
Montgomery County
Maryland, Inc.
CaremarkPCS Health,
L.L.C.
Group Hospitalization and
Medical Services, Inc,
Kaiser Foundation Health
Plan of the Mid-Atlantic
States, Inc.
United HealthCare
Services, Inc.
United Concordia
Companies, Inc. d/b/a
United Concordia Dental
Motorola Solutions, Inc.
Washington Gas Energy
Services, Inc.
Integrys Transportation
Fuels, d/b/a Trillium CNG
The Wilson T Ballard
Company
--
--­
PA prime,
25% local sub
MD prime,
12% local sub
County prime.
18% local sub
No local
participation
' No local
participation
No local
pa rticipation
No local
participation
No local
pa rticipation
No local
participation
No local
participation
No local
participation
No local
participation
MD prime, no
local sub
construc1t~
-
>10% (25%)
construction ­
>10% (12%)
construction ­
>10%(18%)
exempt: non­
profit
no opportunity:
health plan
no opportunity:
health plan
no opportunity:
health plan
no opportunity:
health plan
no opportunity:
health plan
no opportunity:
Motorola
no opportunity:
utility
no opportunity:
fuel
the Bill applies,
has opportunity
1029292
1030764
FY14
1030769
22,819,812.48
123,000,000.00
81,000,000.00
~--
1030766
1030767
61,200,000.00
22,211,000.00
--­
1035901
1040850
1033169
1033010
12,000,000.00
28,925,629.00
15,000,000.00
10,500,000.00
,10,000,000.00
1011775
~Y15
contracts over $10 million
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·
.~~
CONTRACT
#
CONTRACT DESC
Maintenance
&
Repair of Underground
Storm Water Management Facilities
VENDOR
STORM WATER
MANAGEMENT
Current Local
participation
County prime.
No local sub
Contract has
expired
Value
$17,160,000
Local subcontracting
construction
<
1o%,t~:::l~
(0%) has opportunity
Task order based. .
:r;";:
~
Estimated too high.
9803000105AA
1006859
ADA alteration for Various Montgomery
County Facility Projects
Turner Construction
Company
1006857
5346000009AA
~-.
ADA alteration for Various Montgomery
County Facility Projects
CABLE TV PROGRAMMING, MANAGEMENT
AND PRODUCTION SERVICES
....
Kellogg Brown
&
Root
Services, Inc.
MONTGOMERY
COMMUNITY TV
Primary Care Coalition
of Montgomery County
Maryland, Inc.
...
.
rebid this year.
WiII,,:(;~
reserve under LSBRP'
Task order based. . ...•. ':::
VA Prime.
Estimated too high.
Will}
,$25,000,000, I' ...... ... -. -_..,-'-_ .. -
I"No local sub'
rebid this year. Will
;':.
;.
reserve under lSBRP
, .
~.1 ".~f
$25,000,000
V\ifft
~
~
'~--.
No local
pa rticipation
No local
participation
$19,117,000
exempt: non-profit
-
1029292
FY15
0649003006AA
1015061
7344000063AA
7474000122AA
Health Care Services for Low Income,
Uninsured Adults (Montgomery Ca-res)
Public Entity Contract with Housing
Opportunities Commission to create and
develop affordable housing for low to
moderate individuals in the County ..
Standard Heavy Duty Single-Rear-Axle Dump
Trucks wj18,OOO Ib Frontand 23,000 lb.
Rear Capacity
800 MHZ Trunked Radio System, including
equipment, services and maintenance
National Capital Region NCR LlnX System
$10,897,055
exempt: non-profit
HOUSING
OPPORTUNITIES COM
Potomac Mack Sales
&
Service, Inc.
Motorola Inc
Northrop Grumman
Systems Corporation
No local
pa rticipation
$16,901,110
exempt: public entity
MD prime, no
local subs
No local
pa rticipation
No local
pa rticipation
VA Prime.
No local sub
MD prime,
no local sub
VA Prime.
currently 5%
non-local sub
$10,800,000
no opportunity: Dump
Truck
no opportunity:
Motorola
no opportunity:
proprietary
Will rebid this year.
will
reserve one zone under
.j;'
LSBRP
Will rebid this year.
W!II.'1!
reserve one zone under'l'
..
:
LSBRP
Workers comp services .
Has opportunity
$57,029,406
$14,000,000
$13,910,050
;-----­
6506030178AB
Custodial Services - Zone I
LT Services, Inc.
CERTIFIED BUILDING
SERVICES
Managed Care
Innovations, LLC
$16,656,239
6506030178B8
Custodial Services Zone II
$35,697,455
1049987
Self Insured Claims Administration Services
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FY14 and FY15 contracts with Local Subcontracting Opportunities
From the above 2 charts,
• Total 26 contracts over $1 Om.
• 4 construction contracts with>10% local participation (estimated by the PMs). Projects are on-going. The
#
may increase or decrease.
• 15 contracts don't present local participation opportunities (exempted, health insurance related, proprietary products/systems, etc.)
• 7 contracts have local participation opportunities, see the chart below:
CONTRACT DESC
Maintenance
&
Repair of
Underground Storm Water
Management Facilities
ADA alteration for Various
Montgomery County
Facility Projects
ADA alteration for Various
Montgomery County
Facility Projects
Custodial Services - Zone I
VENDOR
STORM WATER
MANAGEMENT
Turner
Construction
Company
Kellogg Brown
& .
Root Services,
Inc.
-
Current Local
pa rticipation
County prime.
No local sub
Contract has
expired
VA Prime.
No local sub
VA Prime.
No local sub
MDprime,
no local sub
VA Prime.·
currentlyS%
non-local sub
-
Value
Expiration
date
Local subcontracting opportunity?
Currently no subcontracting.
Will
re-bid this year. Is
eligible for 61-14 with opportunity
Estimated value should be under $10m. Will rebid
this year.
Will
reserve under LSBRP
Estimated value should be under $10m. Will rebid
this year. Will reserve under LSBRP
Will rebid this year. Will make 4 zones (unbundle)
and will reserVe one zone ,under LSBRP, other 3
zones open to non-LSBRP. Will have opportunity
Will rebid this year. Will make 4 zones (unbundle)
and will reserve one zone under LSBRP, other 3
zones open to non-LSBRP. Will have opportunity
Currently 5% non-local sub. Workers comp services.
Has opportunity.
$17,160,000
6/24/2016
$25,000,000
6/13/2016
$25,000,000
LT Services, Inc.
CERtiFIED
BUILDING
SERVICES
Managed Care
Innovations, LLC
The Wilson T
Ballard Company
....
~
$13,910,050
5/13/2016
Custodia! Services Zone II
$16,656,239
5/13/2016
Self-Insured Claims
Administration Services
Engineering Services for
Transportation Design
&
Planning
..
_.­
$35,697,455
6/30/2017
(ext. 2022)
County prime,
no local sub
....
~
..
J
....
$10 000 000
"
....
3/28/2019
eligible for 61-14 with opportunity
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