GO Item 4
September 29,2014
WorksessioD
MEMORANDUM
September 25, 2014
TO:
FROM:
Government Operations and Fiscal Policy
Commi~D
Robert
H.
Drummer, Senior Legislative Attorney
K.J()
Worksession:
Expedited Bill 42-14, Contracts and Procurement - Minority-
SUBJECT:
Owned Businesses Sunset Date - Amendments
Expedited Bill 42-14, Contracts and Procurement - Minority-Owned Businesses - Sunset
Date - Amendments, sponsored by the Council President at the request of the County Executive,
was introduced on September 16,2014. A public hearing is tentatively scheduled for October 7
at 1:30 p.m.
Bill 42-14 would establish the deadline for submission to the Council by the Executive of
a report that evaluates the minority owned business purchasing program. The Bill would also
extend the sunset date for the program until December 31, 2019.
Background
The Supreme Court in
City ofRichmond v. J. A. Croson Company,
488 U.S. 469 (1989),
established a framework for a local government to implement a program that provides a
preference for minority owned businesses. The Court held that there must be substantial
evidence of past or ongoing discrimination in order to show a compelling government interest to
justify the program. The Program must be narrowly tailored to remedy the past or ongoing
discrimination. For this reason, local governments that have this type of program must evaluate
the continuing need for it every few years. The County Executive submitted a Disparity Study to
the Council on July 1,2014 prepared by Griffin and Strong that supports the continuation of the
program.
2014 Disparity
Study
In May 2013, the County retained Griffin
&
Strong, P.C. (GSPC) to conduct a
comprehensive disparity study. GSPC examined and analyzed the procurement policies and
practices of the County and its prime contractors regarding the use of Minority, Female, and
Disabled owned businesses (MFD) on County contracts for goods and services. The goal was to
determine if there was a statistically significant disparity between the number of MFD firms in
the relevant market and the dollars awarded to MFD firms through County contracts. GSPC
divided County contracts into 4 categories - Construction, Professional Services, Services, and
Goods.
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GSPC conducted a quantitative analysis of the County's contracting history between July
1,2007 and June 30, 2012. This analysis started with a detennination of the relevant geographic
market area for each of the 4 categories of procurement contracts. GSPC concluded that the
relevant market was the geographic area where 75-85% of the fInns contracting with the County
are located. Within each relevant market, GSPC compared the percentage of fInns in each race,
ethnicity, gender, and disability group that are qualified, willing and able to perfonn services
used by the County with the percentage of dollars spent by the County on fInns in each MFD
group. GSPC used this analysis to detennine if each MFD group was underutilized or
overutilized in each relevant market. GSPC looked at both prime contractor utilization and
subcontractor utilization.
GSPC further analyzed the results to determine if the underutilization observed was
statistically significant and if the underutilization could be attributed to the MFD status of the
fInns through both a regression analysis that controlled for other possible explanations, such as
business size or experience, and anecdotal evidence. A summary of the statistically significant
underutilization found by GSPC is at
©9-1O.
The complete report can be found at:
http://\\'"\\'W.montgomelycountymd.!!ov/cat/sel'vices/disparitvstudy.html.
Issues
1.
How does
the
MFD program work?
Section 11 B-60 provides:
(a)
By September 30 of each year, the Chief Administrative Officer must set for the
following calendar year percentage goals of the dollar value of purchases subject
to this Article for each socially or economically disadvantaged group. The goals
must correspond to the availability of that group by source selection method and
purchasing category in the relevant geographic market area as detennined by the
most recent report that the County Executive must submit to the County Council
under Section llB-61(b) to perfonn work under County contracts. The Chief
Administrative Officer must set separate goals for each socially or economically
disadvantaged group in the County's purchases of goods, construction,
professional services, and other services. The Chief Administrative Officer must
not set goals for a socially or economically disadvantaged group unless the Chief
Administrative Officer detennines that the value of purchases made during the
previous fiscal year from that group in each category of purchases under a
particular source selection method, compared with the availability of that group to
perfonn work in that category, shows a significant under-utilization of the group.
A prime contractor awarded a contract subject to the MFD program must subcontract a
defined percentage of the work to an MFD finn. The prime contractor must use one or more
MFD firms belonging to an MFD group for which the CAO has established a percentage goal for
that year. For example, if the CAO detennines that Hispanic-American fInns were not
underutilized in the past year, the CAO will not set a goal for Hispanic-American firms and a
prime contractor will not get credit for using a Hispanic-American firm toward the MFD goal for
that contract. The DGS Director may waive all or part of the MFD goals for a contract upon a
2
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finding that the prime contractor was unable to find sufficient MFD firms after making a good
faith effort to do so.
2. Does the Disparity Study support the extension of the law?
GSPC found a statistically significant underutilization of some MFD groups in each
procurement category that can be attributed to discrimination in the marketplace. Although
GSPC did not fmd a statistically significant underutilization for all MFD groups in each
category, they did fmd that African American owned firms were underutilized in each
procurement category each year of the study. GSPC concluded that the "evidence suggests that
absent affirmative measures the County would be a passive participant in a pattern of exclusion
ofMFD firms." See Study, page 235.
The Disparity Study supports the extension of the MFD program because GSPC found a
statistically significant underutilization due to the MFD status of the owner for some MFD
groups in each procurement category. The MFD program requires the
CAD
to compare the prior
year utilization for each MFD group in each procurement category each year with the availability
found in the Study before setting a goal for an MFD group.
Council staff recommendation:
subject to testimony at the public hearing, approve the extension of the program.
3. Technical amendment.
The definition of
relevant geographic market area
in the law refers to the 2005 Disparity
Study. The definition should refer to the most recent Disparity Study, which is now the 2014
Disparity Study described above.
Council staff recommendation:
amend the definition of
relevant geographic market as follows:
ItB-58. Definitions.
*
(b)
*
*
Relevant geographic market area
means the geographic market area identified by
the County Executive in [[a]] the most recent report [[dated July 1, 2005]] that
evaluates the need to continue the program and is issued in accordance with
Section 11 B-61 (b).
*
This packet contains:
Expedited Bill 42-14
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact statement
GSPC Summary of Findings
*
*
Circle
#
1
3
4
5
9
F:\LA W\BILLS\1442 Minority Owned Businesses - Amendments\GO Memo.Doc
3
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Expedited Bill No.
42-14
Concerning: Contracts and Procurement
- Minoritv-Owned Businesses ­
Sunset Date - Amendments
Revised: September 9, 2014 Draft No.1
Introduced:
September 18, 2014
Expires:
March 18, 2018
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: December 31,2019
Ch. _ _
I
Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
AN EXPEDITED ACT
to:
1) establish the deadline for submission to the Council by the Executive of a report that
evaluates the minority owned business purchasing program;
2) extend the sunset date for the County's minority owned business purchasing program;
and
3) generally amend the County's minority owned business purchasing program.
By amending
Montgomery County Code
Chapter 11B, Contracts and Procurement
Sections IIB-61 and IIB-64
.,. .,.
.,.
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 the following Act:
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BILL
No.
42-14
1
Sec. 1. Sections IIB-61 and IIB-64 are amended as follows:
IIB-61. Reports.
2
3
4
5
*
(b)
*
*
By July 1, [2014] 2019, the County Executive must submit a report to
the County Council evaluating the need to extend the minority owned
business purchasing program.
6
7
8
9
IIB-64. Sunset date.
This Article is not effective after December 31, [2014] 2019.
Sec. 2. Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection ofthe public interest. This Act takes effect on January 1, 2015.
10
11
12
13
14
Approved:
Craig L. Rice, President, County Council
15
Approved:
Date
,16
Isiah Leggett, County Executive
17
18
Date
This is a correct copy o/Council action.
Linda M. Lauer, Clerk ofthe Council
Date
~
~
W\BILLS\!442 Minority
Owned
Businesses - Amendments\BiII
l.Doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 42-14
Contracts and Procurement
-
Minority-Owned Businesses
-
Sunset Date
-
Amendments
DESCRIPTION:
Establishes the deadline for submission to the County Council of a
report that evaluates the minority owned business purchasing
program and extends the sunset date for the program.
The Supreme Court in
City of Richmond
v.
J
A. Croson Company,
488 U.S. 469 (1989), established a framework for a local government
to implement a program that provides a preference for minority
owned businesses. According to the Court, there must be substantial
evidence of past or ongoing discrimination in order to justify the
program. For this reason, local governments that have this type of
program must evaluate the continuing need for it every few years.
The County Executive submitted a Disparity Study to the Council on
July 1, 2014, that supports the continuation of the program.
Fair opportunities for minority owned businesses to obtain County
contracts and business..
Office of the County Attorney, Department of General Services.
To be requested.
To be requested.
To be requested.
Not applicable.
Marc P. Hansen, County Attorney
240-777-6700
Not applicable.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not Applicable.
F:\LAw\BILLS\1442 Minority Owned Businesses - Amendments\LRR.Doc
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE. MARYLAND 20850
Isiah
Leggett
County Executive
MEMORANDUM
August 12, 2014
TO:
Craig Rice, President
Montgomery County Council
Isiah Leggett, County Executive
Extension of Minority-Own
cd
Business Purchasing Program
FROM:
SUBJECT:
In accordance with Section I IB-61 (b) of the County Code, I transmitted to the
County Council the Montgomery County Disparity Study, which evaluated the need
to
extend
Montgomery County's Minority-Owned Business Purchasing Program.
The Disparity Study concluded that Montgomery County has "made great efforts
to establish a fine-tuned procurement process that is set up to provide equal access to all firms."
Nevertheless, the Disparity Study concluded that there is a "significant basis for an inference of
passive participation and discrimination and/or evidence ofpast discrimination against minority,
female, and disabled-owned businesses in Montgomery County." Therefore, work remains to be
done to eradicate the under-utilization of minority-owned businesses in Montgomery County's
procurement program.
Consequently, I am transmitting to the Council legislation to extend the County's
Minority-Owned Business Purchasing Program.
In
addition, I have asked Executive staff to
review other recommendations made by Griffin
&
Strong, the consultants who prepared the
study to increase the effectiveness of the County's Minority-Owned Business Purchasing
Program.
I look forward to working with the Council to pass this important legislation
cc:
Timothy Firestine, Chief Administrative Officer
Marc Hansen, County Attorney
David Dise, Director, Department of General Services
Bonnie Kirkland, Assistant ChiefAdministrative Officer
e<""':'
montgomerycountymd.gov/311
3
.'
.<
240-773·3556 TTY
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Fiscal Impact Statement
Bill #-#, Contracts and Procurement - Minority-Owned Business - Amendments
1. Legislative Summary
The proposed legislation establishes the deadline of July
1,2019,
for submission
to
the
County Council by the County Executive of a report that evaluates the minority-owned
business purchasing program. The legislation would also extend the sunset
date
from
December
31, 2004, to
December
31,2019,
for the County's minority-owned business
purchasing program.
2. An estimate of changes in County revenues and expenditures regardless of whether
the revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
No revenues or expenditures are expected from
the
proposed legislation.
The Department of General Services does not require any additional resources to extend
this program for another 5 years. The current
cost
ofthis program
to
the County
is
$251,883 per
year.
3. Revenue and expenditure estimates covering at least 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 legislation does not affect retiree pension or group insurance costs.
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
The legislation does not authorize future spending.
6.
An
estimate of the staff time needed to implement the bilL
Not applicable.
7.
An
explanation of how the addition of new stall responsibilities would affect other
duties.
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Fiscal Impact Statement: CE
Bill-
Local Business Subcontracting Program
Page2of2
Not applicable.
8.
An estimate of costs when an additional appropriation is needed.
Not applicable.
9. A description of any variable that could affect revenue and cost estimates.
Not applicable.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not applicable.
11. H a bill is
likely
to have no fiscal impact, why that is the case.
The Department of General Services does not require
any
additional resources to extend
this program for another 5 years. The current cost of this program to the County is
$
251,883 per year.
12. Other fiscal impacts or comments.
None
13. The following contributed to and concurred with this analysis:
Gmce Denno, Office of Business Relations and Compliance, Department of General Services
Pam Jones, Office of Procurement, Department of General Services
Erika Lopez-Finn, Office of Management and Budget
Naeem Mia, Office of Management and Budget
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I
:
I
Economic IDIpaet Statement
BiD N, Contracts and ProCllrement -
Minority-Own~
Business - Amendments
!
Background:
This
legislation would
establish
the
deadline of July
1,2019.
for submission
to the
Co~ty
Council by
the
County
Executive of a
report
that
evaluates the minority-owned
business purchasing
program.
The legislation would
also
extend
the
sunset
date
from
December
31, 2014, to
December 31, 2019, for the County's minority-owned business
. purchasing
program.
, .
1.
The
IODree5
of information, assumptions, and methodologies
used.
SoUl'Ce
ofinfonnation is the
Office
of
Business
Relations
and.
Compliance,
Department
of
General Services.
Infonnation
and
data.
in
the
preparation of
the
economic
impact
statem~nt
come from various
annual
reports
from
the Office of
Business Relations
and
Compliance.
2. A
description of
any
variable that could affect the economic impact estimates.
The
variables
that
could affect
the
economic impact
estimates are
the
total
revenues/dollars subject
to
the
Minority, Female,
and
Disabled Person
Owned
Business
Program.
(MID)
and
the
revenues/dollars
spent
to
certified MFD
contractors.
Based
on
data.
provided in the MFD annual reports from
fiscal
year
2011
to
fiscal
year
2013,
the average
total
dollars subject
to MFD
requirements
was
slightly above
$746.5
million
and
the
average
total
dollars for
MFD
procurement was slightly above
$144.7
million or
19.4
percent
3. The BiD's positive or negative effect,
if
any on employment, spending, saving,
investment, ineomes, and property values in the County.
The
extension
of
the
minority-owned
business
purchasing program
(MFD)
would
have
a
positive economic effect ofbusiness income
to
~orlty-oWned
businesses.
Based
on
data
for
the
past
three
fiscal
years
through
FY2013,
the
average number of
contractors was nearly
1.900
(including
both
prime and sub-contractors) with an
average contract award over
sn,ooo
per contractor. The bill could also have an
effect on employment
by
minority-owned
contractors.
4.
If
a BiR is likely
to
have no economic impact, why
is
that
the ease?
The bill would have
a
positive economic impact on minority-owned businesses -
see
paragraph #3.
Page 1 of2 '.
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Economie Impact Statement
Bill #-#, ContractJ and Proeurement - Minority-Owned Business - Amendments
S.
The foDowinl contributed
to
or concurred witIl
this
analysis: David Platt and Rob
Hagedoorn. Finance;
Grace Denno
and
Alvin Boss, Office ofBusiness Relations
and
Compliance, DOS; Naeem Mia, Office ofManagement and Budget.
eJ-ik-:::
o
.
Beach.
Director
artment ofFinance
.
Page 2 of2
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r'C
\JJ
GRIFFIN&
STRONG
r.c
n.
SUMMARY OF HNDlNGS
The Study found a statistically significant disparity between the number ofavailable MFDs in the
relevant markets
in
each work category throughout the term and the utilization, measured
by
dollars awarded by the County, of those same
MFD
groups. GSPC
also
determined that when the
disparity
was
broken down by each race/gender/ethnicity group, on average, over the entire
Study, the following significant underutilizations were found
Table
1:
Summa!'y ofStalistically Significant Underutilization in
Pl'jrnc
Contl'acting
Montgomery County, Maryland
Disparity Study
(Over
Entire
Study Period - July
I, 2007
through June
30, 2012)
From P.O., DPO, and P-card Purchases
Griffin
&:
Strong, P.e.
2014
Construction
African American
Asian
American
Professional
Services
African American
Asian
American
Services
Goods
African American
Asian American
Hispanic American
Native American
Female'
Disabled
African American
Asian American (DPO
and P-card purchases
only)
Hispanic American
(DPO
Hispanic American
Hispanic American
(DPO
and P-card
and P-card purchases
(DPO
and P-card
only)
purchases only)
purchases only)
Native American
Native American
Native American
(DPO and P-card
purchases only)
Female (PO and P-Card Female
Female
purchases only)
Disabled
Disabled
Disabled (pO and P­
cardonlv)
With regard to subcontractors. GSPC found.that the following
MFD
groups
in
the following
business categories showed significant underutilization:
141Page
9
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rc
GRIFF1N&
\...p
STRONG
!'C
Table
2:
Summary of Statistically Signifh..'ant Undcrutilization in Subcontractil1g
Montgomery County, Maryland
Disparity Study
(Over Entire
Study
Period - July
1, 2007
through June
30, 2012)
From Prime Vendor Questionnaire
ConstM.retion
African American
Asian American
Hispanic
American
Native American
Female
Disabled
Professional Services
African American
Hispanie American
NativeAmeriean
Disabled
Services
African American
Asian American
Hispanic American
Native American
Disabled
.Goods
.Asian
American
Hispanic American
NativeAmeriean
Disabled
.
Griffin
&:
Strong, P.C. 2014
GSPC then tested the disparities for likely
cause
through a regression
analysis
and detennined
that Montgomery County. Maryland may
be
an ac.tive or passive participant in past or present
discrimination in
its
vendor marketplace. Notwithstanding
this
general finding, the County has
made some improvements in the inclusion of MFDs in
its
procurement process since the
last,
2005
Disparity
Study
and the enactment of
the
Local
Small
Business Reserve Program in
all
areas
except Construction which decrease by a
minimal.l%.
Table 3: Summary ofMFD Prime Utilization Comparison Between
2001-03
and
2007-12
Montgomery County. Maxyland
Disparity Study
FromP.O.s
Griffin
&:
Strong,
P.c. 2014
:1001-:1003
:1007';':1012
%Cha:nge
- .10
+1.86
+12.34'
+·94
%
%
26.01
8.94
31·95
7·13
Construction
Professional Services
Services
Goods
26.11
7.08
19·61
6.19
Detru.led findings are included in Section
VIIT
of
this
report.
I
Substantial increase
is
primarily due to jump
in
Asian
American
utilization
from
.68
in
2001-3
to
J4.69
in
2007-2012. .
15IPage