Agenda Item 9
January 13,2015
Public Hearing
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
.
/
, r\
.
\';
'.
Robert
H.
Drummer, Senior Legislative
Attorney~'-
.
Public Hearing:
Bill 61-14, Contracts and Procurement - Local Business
Subcontracting Program
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 Government Operations and Fiscal Policy Committee worksession will be
scheduled at a later date.
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 defme a local business as a
for-profit business that has its principal place of business in the 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 Department of General Services or his designee would
be responsible for certifying a business as a local business. The Bill would also authorize the
Director to waive all or part ofthe local subcontracting requirements for a specific contract.
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 ofthese 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.
The Bill would take effect on July I, 2015 and apply to a solicitation for a high dollar value
contract issued after July 1,2015.
This packet contains:
Bill 61-14
Legislative Request Report
Fiscal and Economic Impact Statement
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Business Subcontracting Program\Public Hearing Memo.Qocx
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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: _ _ _ _ _ _ _ __
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 IIB-78 through 11B-83
Boldface
Underlining
[Single boldface brackets]
Rouble 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. 61-14
1
Sec. I.
Sections IIB-78, IIB-79, IIB-80, IIB-81, IIB-82, and IIB-83 are
added as follows:
Article XVll. Local Business Subcontracting Program
IIB-78. Definitions.
In this Section, the following words have the meanings indicated:
Broker
means
~
person that provides goods or services (other than real estate,
2
3
4
5
6
7
8
9
investment, or insurance sales) on
~
pass-through basis as follows:
ill
~
supplier of goods who:
(A)
does not own, operate, or maintain
~
place of business in
10
11
which goods of the general character required under the
contract are kept in stock in the regular course of
business;
ffi}
does not regularly assume physical custody or possession
12
13
14
15
16
17
18
of goods of comparable character to those offered to the
County, or
{Q
exclusively acts as
~
middleman in the sale of goods to
the County; or
ill
~
supplier of services who does not regularly maintain the
19
20
21
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
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
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
~
Local Business under the
provisions ofthis Article.
Local Business Program Manager
means
~
29
30
31
32
person designated
Qy
the Director
to administer and monitor the Local Business Subcontracting Program.
Local Business Subcontractor
means
~
33
34
Local Business that enters into
~
~
contract with
~
Contractor to perform work related to
High Dollar Value
35
36
37
Contract for that Contractor.
IlB-79.
Goals; applicability.
W
Local Business Subcontracting Goals.
This subsection establishes the
38
39
40
following Local Small Business subcontracting goals:
ill
at least 10% of the contract dollars awarded for each High Dollar
Value Contract should be awarded to
~
Local Business; and
41
42
43
44
m
(Q)
at least 10% of the total dollar value of all High Dollar Value
Contracts in the aggregate should be awarded to Local
Businesses.
Applicability.
The Local Business Subcontracting Program goals
rumlY
to each
High
Dollar Value Contract except:
45
46
ill
grants or appropriations under Section I1B-14
W
ill
and (11
cooperative procurements under Section IIB-40;
public entity contracts under Section I1B-41;
emergency procurements under Section I1B-16; or
bridge contracts, under Section IIB-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.
47
48
49
m
ill
ill
ill
50
51
52
53
0-
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BILL No. 61-14
54
55
56
11B-80. Procedures.
ill}
The Director, at the time of
~
solicitation, must publish notification to
businesses when the solicitation may result in !!
High
Dollar Value
Contract.
57
58
59
60
61
®
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
62
63
64
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
~
65
66
Local Business subcontracting plan describing
how the Contractor proposes to meet the 10% Local
Business Subcontracting Program goal;
ill)
67
68
69
70
71
72
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
73
(Q)
promptly notify the Using Department of any change in the
information required under CA) and
during the contract term.
74
75
76
77
78
79
80
.an
of this. subsection
ill
{£)
requiring the Contractor to comply with Local Business
Subcontracting Program goals throughout the contract term.
A Contractor's failure to satisfy the requirements of the Local Business
Subcontracting Program, including !! 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
82
83
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86
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88
89
90
91
92
93
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96
97
98
the· contract for which the County may withhold payment or impose
liquidated damages, in addition to any other remedies available to the
County.
@
The Director may waive all or part ofthe Local Business subcontracting
requirements for
~
specific contract under appropriate circumstances as
established
Qy
Executive Regulation.
.csu
The Director may require each Contractor and Local Business that
participates in the Local Business Subcontracting Program to provide
information concerning utilization
Qy
the Contractor of Local
Businesses in
~
High Dollar Value Contract.
llB-8l.
Regulations.
The County Executive must adopt
this Article. The regulation must include:
~
regulation,
Qy
Method
b
to implement
!ill
monitoring procedures to assist
~
contract administrator and the Local
~
Business Program Manager to determine compliance
Qy
with the Local Business Subcontracting Program;
(hl
Contractor
certification requirements for
~
business to qualify as
under this Article; and
~
Local Business
99
100
101
102
103
104
105
106
107
ill
procedures to certify or decertify
~
Local Business.
llB-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.
llB-83.
Penalty.
!ill
A person must not:
(j)
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BILL
No.
61-14
108
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;
~
109
110
Local Business
111
112 .
113
114
(l}
willfully make
~
false statement to
~
County official or employee
for the purpose of influencing the certification of an entity as
Local Business; or
~
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116
117
118
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.
®
A violation ofthis Article:
119
120
121
122
ill
(l}
is
~
class A violation; and
may disqualify the violator from doing business with the County
for
!ill
to
.f.
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.
123
124
125
Approved:
126
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
of a 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, DOS, OCA, DED
DOS personnel cost to support this program: $153,000
No economic impact
To
be
requested.
To be reque,sted.
Orace Denno and Pam Jones, DOS
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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Business Subcontracting Program\LRR.Docx
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ROCKVILU!, MAR\1.AND
MEMORANDUM
December 15, 2014
TO:
FROM:
Joseph F.
SUBJECT:
:::::r~::s~:=.:oun~::nc~mem a~~
Beach.
\y--""
Director, Dep ,
I
.
Finance
,
PElS for Council Bm 61-14, Locla1 Business Subcontracting Program
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH.:fz
CC:
Bonnie Kirkland,
Assistant Chief Administrative Officer
Lisa Austin, Offices of
the
County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Joseph
F.
Beach. Director, Department of
Finance
David
Platt,
Department
of
Finance
David Disc, Director, Department of General Services
Erika Lopez-Finn, Office of Management and Budget
Alex Espinosn, 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
$10
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 of at least
10%
ofthe value ofthe contract a¥rwd.
'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 aw-ard 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 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 least tbe next 6
f'lSCaI
years.
See item #2.
4. An actuarial analysis through the entire amortization period for each bill
that
would
affect retiree pension or group insurance
co~ts.
1he proposed legislation does not affect
r~ee
pension or group insurance costs.
5.
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 affect future revenue and expenditures
if
the bill authorizes
future spending.
The proposed legislation does not authorize
future
spending.
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7.
An estimate of the
stafftime
needed to implement the bill.
DOS estimates
thai
one (1.0)
PTE
is necessary
to
implement this legislation for a total
annual cost of $79,220
per
year! plus associated expenses of$5,468, for a
total
first-year
cost
ofapproximately $84,688,
One
half
(0.5).PTE is for a
Local
B~ess
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)
.PTE for a Procurement Specialist (under-filled
at
Grade 16) to
analyze
bid
and proposal submissions related to admtional solicitation and contract compliance
requirements, coordinate \\1th
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.
1ne Program Manager
is
needed for OBRG to manage this new program to review
vendors' eligibility, conduct site
visits,
validate compliance, review reports. conduct
outreach; and provide training.
The Procurement Specialist (Expediter) will 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 e0515 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;td require an appropriation of $79,220 for the 1.0
..
..
combined
FIE.
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
computer with MS Office ($1,074 one-time), phone expenses
($660
per
ye;n:).
and initial
furniture
($1,000
one-time).
1
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There is a potential for Bidders ot Offerors to build their increased costs resulting from use
oflocal subcontractors into their
rates
or offers
to
the COtmty. The cost increase to the
County cannot
be
estimated
at
this time.
11. Ranges of 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 case.
Not applicable.
13.
Other
fIScal
impacts or comments.
None
14. The following contributed to and concurred with this analysis:
Grace
Denno~
Office ofBusiness Relations and Compliance, Department of General Services
Pam Jones, Office ofProcurement, Department of General Services
Beryl Feinberg, Department ofGeneral Services
Angela Dizelos, Department of General
Services
Enb
Lopez-Finn, Office of Management and Budget
J2/J5/14
Date
II
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· Economic 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 should go to local businesses. Under the proposed
legislati~
therefore, the
prime
contractor would subcontract \\rith local businesses in
an initial award of the contract value over
$10
million and local businesses would
receive compensation for at least ten percent (10%) of the value ofthe contract.
1. The sources of information, assumptions, and methodologies used.
Source ofinfonnation is the Office of Business Relations and Compliance (OBRC),
Department of General Services (DOS). 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
me
above
data,
approximately
$237.0
million
is
targeK.~
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
a~'arded
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, saving,
investment, incomes, and property values in the County.
The legislation would have
an
economic impact on business revenues and
a
possihle increase in local employment, incomes, and investments. However,
vvithout 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 paragraph #3.
5.
The
following
contributed
to
or concurred
with this
analysis:
David Platt and
Rob Hagedoom, Department of Finance; and Grace Denno. Office ofBusiness
Relations and Compliance. Department of General Services.
F.
Beach)
Director
NPrI!:t"""·nent of Finance
17</1"1- (Ii
Datet
Page 1 of 1
12.