GO Item 1
June 30, 2016
Worksession
MEMORANDUM
June 28,2016
TO:
FROM:
Government Operations and Fiscal Policy Committee
Robert H. Drummer, Senior Legislative Attorney
f(i.j
SUBJECT:
Worksession:
Bill 20-16, Purchases from Minority Owned Businesses
Enforcement of Subcontracting Plan - Request for Proposals - Amendments
Bill 20-16, Purchases from Minority Owned Businesses Enforcement of Subcontracting
Plan Request for Proposals - Amendments, sponsored by Lead Sponsor Councilmember Rice
and Co-Sponsors Councilmembers Leventhal, Navarro, Vice President Berliner, Councilmembers
EIrich, Hucker, Katz, Riemer and Council President Floreen, was introduced on May 17,2016. A
public hearing was held on June 21.
Background
Bill 20-16 would clarify the method of awarding points for an evaluation factor in a request
for proposals to increase the participation ofminority owned firms in certain procurement contracts
and require a liquidated damages clause for failing to comply with a minority owned business
subcontracting plan.
Bill 48-14, Purchases from Minority Owned Businesses Procedures
Request for
Proposals, was enacted on April 14, 2015 and signed into law on April 22, 2015. Bill 48-14
authorized the addition of an evaluation factor in a request for proposals to increase the
participation ofminority owned firms in certain procurement contracts. The Director of the Office
of Procurement is authorized to establish an evaluation factor in a request for proposals that would
award additional points for a proposal from:
(1)
(2)
a contractor for whom a goal has been set under the MFD program; and
a contractor for whom a goal has not been set who proposes to exceed the minority
owned business procurement subcontracting goal established for the contract.
The implementation of Bill 48-14 by the Executive has resulted in situations where a non­
MFD prime contractor who agrees to subcontract more than the minimum MFD subcontracting
goal can earn more points under this evaluation factor than an MFD prime contractor. This
interpretation of the law by the Executive conflicts with the underlying purpose of Bill 48-14 - to
increase the number of MFD primes awarded these contracts. Bill 20-16 would clarify the intent
of this provision by requiring an MFD prime to be awarded the maximum number of points for
this evaluation factor and a non-MFD prime who agrees to subcontract more than the minimum
MFD subcontracting goal less than the maximum points.
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Bill 20-16 would also require a contract with an MFD subcontracting goal to also include
a liquidated damages clause for a contractor who fails to comply with an approved MFD
subcontracting plan without a waiver. Under current law, a liquidated damages clause is optional.
The Purpose of Bill 48-14
Montgomery County has operated a voluntary affirmative action plan in its procurement
policies based upon the race and gender ofthe owners ofthe business for more than 20 years (MFD
Program). During this time, the MFD Program has included a requirement that a prime contractor
on most County contracts subcontract a certain percentage of the work to MFD firms. Since the
United States Supreme Court decided
City ofRichmond
v.
Croson,
488 US 469 (1989), a state or
local government preference in contracting based upon race or gender must satisfy the Court's
strict scrutiny
test to survive a challenge under the Equal Protection Clause ofthe
14th
Amendment.
Under the strict scrutiny test, the government must show that the affirmative action program is
based upon a compelling governmental interest and is narrowly tailored to achieve this interest.
Eliminating the effects of past discrimination based upon race and gender in government
contracting is a compelling governmental interest.
In May 2013, the County hired Griffin & Strong, PC (GSPC) to conduct a comprehensive
disparity study. The goal of the study was to determine if there exists a statistically significant
disparity between the number of available MFD firms in the relevant market and the number of
MFD firms that have received work on County contracts. GSPC conducted a quantitative analysis
of the County's contracting history between July I, 2007 and June 30, 2012. This analysis started
with a determination of the relevant geographic market area for each of the 4 categories of
procurement contracts - Construction, Professional Services, Services, and Goods. GSPC
concluded that the relevant market was the geographic area where 75-85% ofthe firms contracting
with the County are located. Within each relevant market, GSPC compared the percentage of
firms in each race, ethnicity, gender, and disability group that are qualified, willing and able to
perform services used by the County with the percentage of dollars spent by the County on firms
in each MFD group. GSPC used this analysis to determine 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 ifthe underutilization could
be
attributed to the MFD status ofthe firms
through both a regression analysis that controlled for other possible explanations, such as business
size or experience, and anecdotal evidence.
The complete report can be found at:
http://www.montgomerycountymd.gov/cat/services/disparitystudy.htmi.
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 find a statistically significant underutilization for all MFD groups in each category, they
did find 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 of MFD firms." See Report,
page 235.
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The principal component of the County's MFD Program for the past 20 years has been a
subcontracting requirement. The County operates a Local Small Business Reserve Program that
results in awards of prime contracts to local small businesses
I,
but the MFD program has
concentrated on subcontracting goals. DOS found that in FYI4, MFD firms submitted only 32%
ofthe bids, but received an award 57% of the time they bid. In contrast, non-MFD firms submitted
68% of the bids, but received an award only 42% of the time they bid. Here are the FY14 statistics
from DOS:
FY14 prIme mmOrIty contractors responses and awards
.
#
of bids/proposals %of
submitted
bids/proposals
submitted
Non-MFD
68%
African American
Hispanic American
Asian American
Native American
Female
Persons with
Disabilities
TotalMFD
25
28
8
0
27
9
8%
9%
3%
0%
9%
3%
#
of Awards
% of awards resulting from
submitted
42 % (88/208)
7
19
5
0
16
4
28%
68%
63%
0%
59%
44%
97
305
32%
100%
51
139
57% (51/97)
47%
Total
Therefore, part of the remedy for the statistical underutilization may be increasing. the
number of MFD firms that bid on County contracts. Bill 48-14 was enacted as an additional tool
that could be used to directly increase the number of MFD firms bidding and ultimately winning
awards of County contracts. Bill 20-16 would encourage MFD firms to bid on these contracts by
ensuring that an MFD finn would receive the maximum points for this evaluation factor.
Public
Hearing
Procurement Director Cherri Branson, testifying on behalf of the Executive, opposed the
BilL See ©7-9. Ms. Branson was concerned that the Bill could limit opportunities for small MFD
firms to gain work as subcontractors by favoring MFD prime contractors. MFD business owners,
Fekadu Megersa (©10), Steve DeVoe (©11-12), and Toby Studley (©13), each opposed the Bill
because it would reduce the incentive for MFD prime contractors to subcontract to MFD
businesses. Juan Holcomb, representing the Minority Business Economic Council echoed these
concerns.
Many local small businesses are also MFD firms. A small business reserve program based only on the size of the
firm is often considered a race and gender neutral program that can increase the utilization ofMFD businesses without
satisfying the strict scrutiny test.
1
3
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Issues
1.
The County Attorney Bill Review.
The County Attorney's Office bill review memorandum is at ©14-17. The County
Attorney opined that the requirement in the Bill that an MFD prime receive the maximum points,
although not free from doubt, does not violate the Equal Protection Clause of the United States
Constitution. Council staff agrees with this analysis.
The County Attorney raised some concern about requiring the Director to withhold
payments and impose liquidated damages against a contractor who fails to comply with an
approved MFD subcontracting plan. Council staff believes that the proper construction of this
provision is for the Director to withhold payments in order to satisfY the liquidated damages that
are assessed against the contractor, not in addition to imposing liquidated damages. The policy of
this provision is discussed in greater detail below.
2. Should the Bill mandate the imposition of liquidated damages against a contractor who
fails to comply with an approved MFD subcontracting plan without a waiver?
Most County contracts require the prime contractor to subcontract a certain percentage of
the work to one or more MFD firms. The prime contractor must submit a subcontracting plan
showing the MFD subcontractors and the portion ofthe work to be subcontracted before the notice
of award is issued. Problems arise when the prime contractor does not comply with an approved
MFD subcontracting plan. Current law authorizes the Procurement Director to withhold any
remaining payment or assess liquidated damages unless the contractor receives a waiver or
successfully defends a claim for non-payment from the MFD subcontractor in arbitration. The
Bill would permit the Director to withhold payment and impose liquidated damages. The current
law requires the liquidated damages to be based upon the difference between the money the prime
contractor agreed to pay to MFD subcontractors and the amounts actually paid. Current law also
authorizes the Director to find a contractor who has failed to comply with an approved
subcontracting plan non-responsible for future procurements during the next 3 years.
Council staff met with the Director and representatives of the County Attorney's Office to
discuss this Bill. The Director has not imposed liquidated damages or found a contractor non­
responsible under this provision in recent years. Instead, Procurement staff has generally
succeeded in increasing compliance by threatening to impose sanctions against contractors who
are not complying with a subcontracting plan and helping them find MFD subcontractors. The
general conditions applicable to all procurement contracts with an MFD subcontracting goal
already include the required liquidated damages provision. Therefore, the change on line 61 of
Bill 20-16 would not change current enforcement procedures. The Committee may want to discuss
the need for other amendments to the procurement law that may assist the Director to enforce these
provisions. Council staff recommendation: amend the Bill to remove the change of "or" to
"and" as unnecessary.
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3. Should an MFD prime always receive more points than a non-MFD prime?
The Director implemented the authority granted in Bill 48-14 by amending the general
conditions for contracts. The formula used by Procurement to calculate points for the MFD
evaluation factor is shown on
©
18-20. Assuming a total of 100 points, the MFD evaluation factor
is worth 10 points.
An
MFD prime receives 5 points for being a certified MFD. The MFD prime
receives an additional 5 points if they submit an MFD subcontracting plan that meets the MFD
subcontracting goal for a total of 10 points.
An
MFD prime who submits a subcontracting plan
with less than the goal receives a percentage of the second 5 points and a total of less than the
maximum 10 points. A non-MFD prime receives 0 points as a prime, but can receive the maximum
10 points for submitting a subcontracting plan that exceeds the MFD goal by as little as 1 percent.
For example, a non-MFD prime with a subcontracting plan of 16% on a contract that has a 15%
goal receives the maximum 10 points.
Director Branson, in her testimony at ©7-9, included a chart showing that the
implementation of Bill 48-14 has significantly increased the percentage of work subcontracted to
MFD firms.
It
appears that the extra incentives for non-MFD primes to submit an MFD
subcontracting plan that exceeds the contract goal
has
succeeded in motivating this result. This
would explain the testimony from the owners of small MFD firms who have succeeded in
obtaining additional subcontracting work since the implementation of Bill 48-14. However, this
was not the fundamental goal of Bill 48-14. The County's MFD program has been concentrated
on encouraging prime contractors to share a portion of the work with
NIFD
firms for many years.
Based upon the GSPC study, the County has made significant progress in this area. However, Bill
48-14 was designed to encourage MFD firms to bid as a prime contractor by awarding them
additional points under an RFP. The formula created by Procurement can result in a non-MFD
prime receiving more points under the MFD evaluation factor than an MFD prime based upon the
MFD subcontracting plan.
Bill 20-16 would require that an MFD prime receive the maximum points and a non-MFD
prime who submits an MFD subcontracting plan that exceeds the contract goal with less than the
maximum points. The Bill would therefore require the Director to change the formula used to
calculate points for this factor. Bill 48-14 gave the Director discretion to create a formula that
awarded the maximum points to an MFD prime as long as additional points were awarded to both
an MFD prime and a non-MFD prime who exceeds the contract goals. There are different ways
to create a formula that both encourages MFD primes to submit an offer and still encourages a
non-MFD prime to exceed the contract goals. An alternative to defining the formula in the law
would be to require the Executive to adopt a method 2 regulation establishing a formula to
implement this provision. This would give the Director some discretion in re-calculating the
formula, but still require Council approval of the regulation establishing the formula. Council
staff recommendation: amend the Bill to require the Executive to adopt a method 2 regulation
establishing the formula. This could be accomplished with the following amendment:
Amend lines
75-83
as/ollows:
(5)
an evaluation factor with a value of no more than 10% of the total available
points in a request for proposals issued under Section 11 B-1 0 awarding
[additional points for a proposal from] additional points for a proposal from:
5
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(A)
[[the maximum points for]] a contractor for whom a goal has been set
under subsection (a); and
(B)
[[less than the maximum points for]] a contractor for whom a goal has
not been set who proposes to exceed the minority owned business
procurement subcontracting goal established for the contract.
The Executive must adopt a method 2 regulation defining how the points
awarded under paragraph
(5)
must be calculated.
This packet contains:
Bill 20-16
Legislative Request Report
Testimony
Cherri Branson
Fekadu Megersa
Steve DeVoe
'Toby Studley
County Attorney Bill Review Memorandum
Procurement Evaluation Criteria
Fiscal and Economic Impact Statement
F:\LAw\BlLLS\ 1620 MFD - RFP - Amendments\GO Memo.Docx
Circle #
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Bill No.
20-16
Concerning: Purchases from Minoritv
Owned Businesses - Enforcement of
Subcontracting Plan - Request for
Proposals - Amendments
Revised: May 24,
2016
Draft No. _4__
Introduced:
May 17,
2016
Enacted:
November 17,
2017
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
- = = ' - - - - :_ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Rice
Co-Sponsors: Councilmembers Leventhal, Navarro, Vice President Berliner, Councilmembers
EIrich, Hucker, Katz, Riemer, and Council President Floreen
AN
ACT
to:
(1)
clarify the method of awarding points for an evaluation factor in a request for
proposals to increase the participation ofminority owned firms in certain procurement
contracts;
require a liquidated damages clause for failing to comply with an approved minority
owned subcontracting plan; and .
generally amend the County's minority owned business purchasing program.
(2)
(3)
By amending
Montgomery County Code
Chapter 11 B, Contracts and Procurement
Section 11B-60
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 unqffected by bill
The County Council for Montgomery County, Maryland approves thefollowing Act:
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BILL
No. 20-16
1
Sec.
1.
Section IlB-60 is amended as follows:
IlB-60. Procedures.
(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 determined by the most recent report
that the County Executive must submit to the County Council under
Section 11B-61
(b)
to perform 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
2
3
4
5
6
7
8
9
10
11
12
13
14
Administrative Officer must not set goals for a socially or economically
disadvantaged group unless the Chief Administrative Officer determines
that the value ofpurchases 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 perform work in
that category, shows a significant under-utilization of the group.
(b)
The Chief Administrative Officer must adopt procedures
to
certifY and
decertifY minority owned businesses.
(c)
The Office ofProcurement must publicly notifY businesses ofprospective
procurement opportunities.
(d) For those procurements where a goal has been set under subsection (a),
the Office of Procurement must encourage minority owned business
participation in procurement. These activities should include:
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16
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25
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BILL
No.
20-16
27
28
29
30
(1)
distribution to potential contractors for whom a goal has not been
set of a list of potential minority owned business contractors for
whom a goal has been set with a requirement that one or more be
contacted if any work subject to a goal is being subcontracted;
31
32
33
34
(2)
a provision in all solicitations for procurements in excess of
$50,000 that requires, subject to the waiver provisions of
subsection (h), businesses for whom a goal has not been set acting
as prime contractors to subcontract to minority owned businesses
for whom a goal has been set a percentage ofthe total dollar value
of the contract that is consistent with the numerical goals
established under subsection (a);
35
36
37
38
39
40
(3)
a requirement that a contractor for whom a goal
has
not been set:
(A)
agree to a plan showing how the contractor proposes to meet
its minority owned business procurement subcontracting
goal; and·
(B)
identify, before a notice to proceed is issued or performance
of a contract begins, whichever occurs first, each minority
owned business that the contractor intends to subcontract
with and the projected dollar amount of each subcontract,
and promptly notify the using department of any change in
either item;
41
42
43
44
45
46
47
48
(4)
contract requirements that minority owned business participation
goals be maintained by prime contractors throughout the life ofthe
contract, including modifications and renewals, subject to the
waiver provisions of subsection (h). Contract requirements:
(A)
may include obligating contractors subject to the minority
owned business procurement goals to provide in each
49
50
51
52
53
o
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BILL
No. 20-16
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66
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70
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75
76
77
78
79
(5)
(B)
subcontract with a minority owned business a provision
requiring the use of binding arbitration to resolve disputes
between the contractor and the minority owned business
subcontractor; and
must make failure to submit documentation showing
compliance with a minority owned business subcontracting
plan under paragraph (3) grounds for withholding any
remaining payment [or] and imposing liquidated damages
unless failure to comply with the plan is the result of an
arbitration decision under subparagraph (A) or a waiver
granted under subsection (h). Liquidated damages under
this provision must equal the difference between all
amounts the contractor has agreed under its plan to pay
minority owned business subcontractors and all amounts
actually paid minority owned business subcontractors under
the contract, considering any relevant waiver or arbitrator's
decision.
Failure to show compliance with a minority
owned business subcontracting plan must also result in
fmding the contractor non-responsible for purposes of
future procurements with the County during the next 3
years; and
an evaluation factor with a value ofno more than 10% of the total
available points in a request for proposals issued under Section
IIB-10 awarding [additional points for a proposal from]:
(A)
the maximum points for a contractor for whom a goal has
been set under subsection (a); and
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BILL
No. 20-16
80
81
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87
(B)
less than the maximum points for a contractor for whom a
goal has not been set who proposes to exceed the minority
owned
business
procurement
subcontracting
goal
established for the contract.
*
Sec. 2. Transition.
*
*
The amendments in Section 1 apply to any contract awarded after the date this
Act takes effect.
Approved:
88
89
Nancy Floreen, President, County Council
Date
90
91
Approved:
Isiah Leggett, County Executive
Date
92
93
This is a correct copy o/Council action.
Linda M. Lauer, Clerk ofthe Council
Date
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LEGISLATIVE REQUEST REPORT
Bill 20-16
Purchases from Minority Owned Businesses
-
Eriforcement ofSubcontracting Plan
-
Requestfor
Proposals
-
Amendments
.
DESCRIPTION:
Bill 20-16 would clarify the method of awarding points for an
evaluation factor in a request for proposals to increase the participation
of minority owned firms in certain procurement contracts and require
a liquidated damages clause for failing to comply with a minority
owned business subcontracting plan.
The implementation of Bill 48-14 by the Executive has resulted in
situations where a non-MFD prime contractor who agrees to
subcontract more than the minimum MFD subcontracting goal can
earn more points under this evaluation factor
than
an MFD prime
contractor. This interpretation of the law by the Executive conflicts
with the underlying purpose of Bill 48-14 to increase the number of
MFD primes awarded these contracts.
The goal is to increase the number of contracts awarded to MFD
primes to remedy the effects of past discrimination.
Procurement, County Attorney
To be requested.
To be requested.
To be requested.
To be researched.
Robert
H.
Drummer, Senior Legislative Attorney
Not applicable.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Contractual penalties.
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TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAB LEGGETT
On
Bill 20-16
MFD
Enforcement - Subcontracting Plan
June
21, 2016
Good afteJ;Iloon Council President Floreen and members of the County Council.
I am Cherri Branson, Director of Procurement. I am pleased to be here on behalf of County
Executive Isiah Leggett to testify on Bill 20-16, Purchases from Minority Owned Businesses
Enforcement of Subcontracting Plan - RFPs - Amendments, introduced on May 17, 2016 by
Councilmember Rice and Councilmember Leventhal.
Mr.
Leggett supports the Council's efforts to increase access to County contracting opportunities
for businesses owned by Minority, Female and Disabled Persons (M:FD). He is concerned,
however, that the proposed change to the current system of rewards will have unintended
consequences. Under Bill20-I'6, an MFD will receive 10 points for being an MFD. There will
be no need or incentive for it to subcontract to achieve additional points. Further, a Non-MFD
firm
will not be able to reach full points regardless of the number of MFD subcontractors it may
use.
In
2014, a Montgomery County Disparity Study conducted by
Griffm
and Strong, P.C. and
commissioned by the County Executive found that "a business owner's race, ethnicity, gender
and disability status has a statistically significant and adverse effect on ... securing public
contracting and subcontracting opportunities relative to Non-MFD business owners".
In
response to those findings, the Council passed and the Executive signed Bill 48-14.
It
went
into effect on July 22,2015. Bill 48-14 established a point system to evaluate subcontracting of
MFD and Non-MFD businesses bidding on Request for Proposals (RFPs). The language of Bill
48-14 expressly permitted the award of 10% of the total available points in an RFP to both an
MFD contractor and a Non-MFD contractor. A non-MFD, however, may only obtain maximum
points by "propos[ing] to exceed the minority owned business procurement
s~bcontracting
goal."
As we approach the one year anniversary of Bill 48-14, we want to share the data we have
gathered on the bill's implementation. The attached chart includes pre- and post- Bill 48-14 data.
While Bill 48-14 is new, and the data is limited, the early data is promising. Bill 48-14 increased
MFD subcontractors' opportunities, in the following ways:
1.
On average, each offer contained more than 1 MFD subcontractor. Before Bill 48-14,
MFD subcontractors were rare. There was less than 1 subcontractor in every 5 offers.
2. After Bill 48-14, MFD plans submitted by the offerors usually exceeded the category
goals. Exceeding the goals did not happen often before Bill 48-14.
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3. After Bill 48-14, 50% of contract awards went to :MFD prime contractors.· Before Bill
48-14, :MFD prime contractors were awarded about 20% of contracts.
One concern that Bill 20-16 attempts to address is that under Bill 48-14, a Non-:MFD prime
contractor can earn more points under the evaluation factor than an:MFD prime contractor. Tills
is so because an
:MFD
firm receives 5 points for being an :MFD firm while a Non-:MFD prime
contractor that exceeds the :MFD subcontracting goal will receive 10 points, in essence being
rewarded for embracing the county's attempt to address disparity in contracting opportunities.
But to be clear, this outcome will only occur if the
:MFD
prime contractor does not subcontract·
with any MFD firms. But, in fact, the :MFD contractor can receive additional points (up to 5
additional points for a total of 10) if it meets just half of the :MFD subcontracting goal, also being
rewarded for embracing
:MFD
subcontracting.
Another unintended consequence of Bill 20-16 is that it may have a negative economic and
business impact on smaller :MFD businesses whose main avenue for obtaining government
contracting opportunities is through subcontracting. These
:MFD
companies may have fewer
subcontracting opportunities from both the :MFD and non-:MFD prime contractors, because Bill
20-16 removes or reduces the incentives for the :MFD and non-:MFD prime contractors to bring
:MFD subcontractors along when they submit their proposals. '
At this point, the data on Bill 48-14 does not indicate that MFD prime contractors are harmed..
Additionally, the data does not indicate that MFD subcontractors are harmed. To the contrary,
our current data indicates that MFD prime contractors and subcontractors have obtained more
opportunities under Bill 48-14.
It
may be best to allow sufficient time to determine whether Bill
48-14, working in conjunction with other procurement reforms have increased contracting and
subcontracting opportunities for prime and subcontractors in the:MFD business community.
Montgomery County is the proud home for a diverse, vibrant, minority-majority population. Our
vendor base must reflect this diversity. The County Executive applauds the Council's recognition
of the need to support the :MFD business community and has made strengthening the County's
:MFD program a priority. We look forward to continuing our collaboration on this issue of vital
importance.
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FY15 (Oct-May)
before
48-14
I
FY16 (Oct- May)
after 48-14
I
Notes
Number ofRFPs issued
Total offerors (primes who
submitted a proposal)
MFD offerors
(MID
primes who
submitted a proposal)
• Resulting contract awards
Contracts awarded to MFD prime
44
163
25
I
84
46 (=28%)
• 26 (=31%)
10 (total value $8.5m)
2 (= 20%) total value
$546K
4 (total value $55.8m)
2 (= 50%) total value
$50m
More MFD primes got the
. !
contract awards after Bill
48-14 implementation, the
$ amount is significantly
higher.
Bill 48-14 brought many
more MFD subcontractors
when the primes submitted
their proposals
Total MFD sub opportunities
submitted by primes
26 (average less than 1
sub out of every 5
offerors = 16%)
89 (average more than
1 sub every offeror
=106%)
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Montgomery County Council
Third Floor Hearing Room
100 Maryland Avenue
Rockville, MD 20850
Fekadu Megersa,
President and CEO
NextGen IT Solutions
2 Valleyfield Court
Silver Spring, MD 2016
June 21,2016
@
1:30 pm - 3:30 pm EDT
My name is Fekadu Megersa, I am the owner of NextGen IT Solutions providing IT and supporting
services based in Silver Spring, MD.
I am a participant in the County's Minority Business Program (MFD Program) as an African American
firm, certified by the Maryland Department of Transportation that is recognized by Montgomery County.
Currently I am a minority subcontractor on the County's MCCATs contract working with two prime
contractors (MFD prime, other non-MFD prime) through the MFD program that gave me the opportunity
to compete for the work I am now doing.
This opportunity would not be made possible if the MFD office did not have legislation in place (current
bill 48-14) to provide the incentive for the primes to engage me and seek the participation and support of
minority businesses, be that prime minority or non-minority.
Bill 20-16 would remove any possible incentive for a prime (minority or non-minority) to do business
with a minority business and widen the gap of opportunity for minority businesses to sustain and
economically empower in building their business and communities.
To this end bill 20-16 would having the devastating affects with the MFD program moving forward:
• Lack the incentive to engage the participation of minority firms
• Established goals set by the County would be severely challenged or not met
• Only minority primes would benefit by not given the incentive to subcontract to minority firms.
• A perception of bias in fair distribution of points award over non-minority primes
• Comes into questions as to best practice of procurement regulations: discrimination and
evaluations being fair and reasonable
• Some will benefit while many may not have opportunity to do business with the County in any
subcontracting capacity.
• A reflection of the County's old way of doing business with minority firms by continuing ways to
create barriers.
Bill 20-16 will further distant the minority business communities in gaining access in seeking
opportunities in doing business with the County for which this County cannot risk. Above all, the life of
minority business owners and families depends on MFD.
Finally, I would like thank the Office of Montgomery County Business Relations and Compliance,
specially Alvin Boss, for guiding and encouraging me to approach prime contractors of MCCAT and
LCAT.
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Tiger Personnel Services, Inc.
temporary
&
Permanent Stamm)
8730 Georgia flvenue, Suite £f12
June 21, 2016
Silver Spring, Maryland 20910
Phone: 301-578-8585
UR~:
Fax: 307-578-8698
www.tiqerpersonneiinc.com
TO:
FROM:
SUBJECT:
Montgomery County Council
Steve DeVoe, VP
Bill 20-16, Minority Owned Business Procurement Amendments
SUMMARY
Tiger Personnel Services opposes th,e proposed changes to the Minority Owned Business (MFD)
subcontracting plan through amendments.
We believe the amendments will have a
detrimental/chilling effect on MFD participation inlby Montgomery County MFD businesses.
Who WeAre:
Tiger Personnel Services, Inc. (TPSI) is a Montgomery County based, minority (African­
American), woman-owned small business. We are headquartered in Silver Spring, Maryland and
have been an active business in the County since our inception in August 2000. We feel
compelled to respond to the proposed changes to the MFD Plan since we are a company that the
current Plan seeks to assist. In addition to being certified as a Minority Business Enterprise
(MBE) by the Maryland Department of Transportation, we are certified as a LSBRP by
Montgomery County - CVRS Vendor ID is TGR08014.
As a Montgomery County MFD we have benefited from the current program. On two occasions,
we were included as a MFD in the Subtracting Plan of the Prime contractor that won a County
Construction bid. On both occasions the Primes responded to our marketing efforts by adding us
as a subcontractor to their bid to the County. Without the requirement of presenting qualified
MFDs in their plan, we are sure that we would have missed those opportunities since they had
not used us in previous construction projects. (On both occasions, we were told to ensure that our
certifications were up-to-date so they could get credit on their Plan). Because of the effectiveness
of the current program, the County has opened a much needed revenue stream for minority
owned businesses as well as created opportunities for us to add more jobs to the County tax base.
From the prospective of this Montgomery County small business, the proposed amendments to
the current Subcontracting Plan would have a "chilling" effect on MFD participation rather than
act as encouragement for more participation.
1) MFD finns have the opportunity to earn the maximum amount of points under the current
bidding structure. For example, there is no hindrance from an MFD finn. in fonnulating a
Subcontracting Plan that incorporates other MFD finns. MFD finns should communicate with
each other and establish business relationships for the benefit of all. This lack of association
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each other and establish business relationships for the benefit of all. This lack of association
between businesses hinders the business partnerships that "grow" both companies. The State of
Maryland has promoted a Plan for many years that require Minority Owned firms to add
subcontracting plans for certain procurements. Their program succeeded because the minority
firms learned that to get the maximum amount of points, they had to involve other MBE firms
with/in their bid. With a little more education to Montgomery County MFD firms, they will
recognize that they can win more contracts by adding other MFD firms with their bids.
2) Also, the County should not discourage Primes who exceed County suggested MFD
participation goals by limiting points allowable under the current Plan. To provide evaluation
criteria that allows "hfss than maximum points" for a contractor for whom a goal has not been
set, who proposes to' exceed the minority owned business procurement subcontracting goal
established for the contract, may appear on its face to benefit MFD firms. However, history has
taught us that Primes who surpass requirements bring many more MFDs to the table of business
opportunity. Primes should be encouraged and applauded who go beyond the call of duty and
submit Plans that exhibit excellent MFD participation. If Primes do not receive the points as
currently established, many less MFDs are brought to the table of opportunity.
Sincerely,
~~~
Steve DeVoe
Vice President, Contract Administrator
Tiger Personnel Services, Inc.
(301) 578-8585, ext 203
sdevoe@tigel:personnelinc.com
,
\.
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fsps
CONSULTING
June 21, 2016
To: County Council
Subject 8i1l20-16
Purchases from Minority Owned Businesses-Enforcement of Subcontracting Plan-Requests for Proposal
My name is Toby Studley and I am the owner of an MFD certified firm here in Rockville. I have been in
business for 20 years and I feel it is important for Minority firms to sub to other minority firms as often
as possible.
Encouraging minority owned firms to subcontract to other minority owned firms will benefit the
community by creating more jobs, which in turn will create more consumer spending and ultimately
help drive the local economy. In addition, subcontracting to minority owned firms will bring people
together to share ideas and become a more cohesive community.
Successful companies did not become that way all by themselves. We became that way through
thoughtful people helping us and giving us opportunities to grow. I want to help companies the same
way a few took the time to help me. All too often, it has been my experience that few companies want
to take the time to help one another. I feel that if a requirement and/or incentive is put in place for
minority firms to sub to other minority firms not only will it help everyone succeed but also the prime
will see the personal satisfaction from the sincere appreciation of the recipient firm!!
There is enough business out here for everyone and if people would take the time to help one another
by meeting or exceeding the subcontracting goals set for minority firms regardless if there is an
incentive to the prime contractor or not, I think the primes would benefit in ways they would never have
imagined.
Please reconsider requiring MFD Primes to sub to other minority owned companies. I think we should be
required to share our good fortune with other minority owned companies.
Thanks for your time,
Toby
1901 Research Boulevard, Suite 320 • Rockville, MD 20850. (301) 652-9112 Phone. (301) 652-9114 Fax
/3
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Isiah Leggett
County Executive
Marc P. Hansen
County Attorney
OFFICE OF THE COUNTY ATTORNEY
MEMORANDUM
June
16,2016
To:
From:
Re:
Cherri Branson. Director
Office ofProcurement
Edward
B.
Lattner£g
J-­
Summary
Bill 10-16, Procurement - Purchases from Minority Owned Businesses­
Enforcement of Subcontractors Plan-Request for Proposals-Amendments
This Office is forwarding to you its comments concerning Bill
20-16.
The Bill's long title
states that it
will:
(a) clarify the method ofawarding points for an "evaluation factor" as part of
determining the highest-ranked offeror in a request for proposals ("RFP"), to increase the
participation ofminority-owned
firms
as contractors, as opposed to subcontractors and
(b)
require
a
liquidated damages clause in a contract arising from an RFP, for failure by the
contractor to comply with an approved minority-owned business subcontracting plan. We believe
this Bill
is valid and
lawful,
although we have concerns about the mandatory imposition of
liquidated damages.
As
to the first aspect ofthe Bill, the courts have upheld governmental affirmative action
programs establishing an
MFD
(minority, female, disabled) participation goal in the face of
challenges under the
U.S.
Constitution's
Equal
Protection Clause.
In
all
these programs,
a
non­
MFD
prime contractor could
still
successfully compete and meet the participation goal through
MFD
subcontracting. Bill
20-16
would require thatthe County award more points to a prime
contractor (for whom a goal
has
been set under the
MFD
program)
than
to a prime contractor
(for whom
a
goal
has
not been set), even if
that
contractor proposes to exceed the participation
goal
through
MFD subcontracting. Although we
are
unware of any case upholding such a
program, we believe that the Bill's use ofMBE status as a "plus factor," in the context of
individualized consideration of each proposal and in the absence of inflexible quotas, although
not entirely free from doubt, will pass constitutional muster.
As to the second aspect ofthe Bill, we
are
concerned
that
the mandated use of liquidated
damages, in addition to withholding any remaining payment owed to the contractor, may be
pI
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Cherri Branson
June
16,2016
Page 2
viewed as an impermissible penalty.
MFD Partieipation
Bill
48-14,
which preceded Bill
20-16
and
has
been enaCted into law, stated that the
activities through which the Office ofProcurement "must" encourage
MFD
participation in
procurement "should" include, in an RFP: "an evaluation factor with a value of no more that
10%
ofthe total available points" awarded to:
"(A)
a contractor for whom [an MFD] goal
has
been
set,
and
(B)
a contractor for whom [an MFD] goal has not been set who proposes to exceed
the
MFD
goal established for the contract." Bill
20-16
now seeks to amend that legislation to
require that an MFD prime contractor receive the "maximum points," while a non-MFD prime
contractor receive "less
than
the maximum points," for this evaluation factor.
The U.S. Supreme Court
has
held that legislation establishing benefits or incentives based
on race-based classifications, including tho.se involving affirmative action programs related to
government contracting with MFD businesses, must
be
subjected
to
strict scrutiny by the courts.
In
other words, these classifications are constitutional only ifthey further a
compelling
government interest
and are
narrowly tailored
measures to meet that interest
Adarand
Constructors, Inc.
v.
Pena,
515 U.s. 2097 (1995);
City ofRichmondv.
J.
A. Croson,
488 U.S.
469 (1989).
The Supreme Court went on to state the ''the standard of review under the
Equal
Protection Clause is not dependent on the race ofthose burdened or benefited by a particular
classification, and that the single standard of review for a racial classification should
be
strict
scrutiny."
Adarand,
515
U.S. at
222;
Croson,
488
U.S.
at 493.
While the Court
has
established
that strict scrutiny is the appropriate standard to apply when reviewing legislation that establishes
race-based
classifications,
and
bas
highlighted the need to
analyze
the legislation'S
constitutionality with "skepticism," "consistency," and "congruence," the actual application of
the
standard
to
a given set of facts
has
been less certain.
See id.
The County
has
established a compelling governmental interest
to
support the use of
:MBE status in the award of contracts. The County Council seeks to remedy a compelling
government interest related to past historic discrimination, and the underutilization ofMFD finns
as prime contractors or subcontractors in County construction, professional services, services,
and goods contracts. The May
13,2016,
memorandum that introduces the Bill notes that the
Griffin
& Strong, P.C., disparity study found a statistically significant underutilization of some,
but not all, MFD groups in each contract category, and that African American owned
firms
were
underutilized in each contract category. The disparity
study
supports that a compelling
government interest exists regarding the MFD groups for whom it established a participation
goal
in
each contract category.
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Cherri Branson
June
16,2016
Page 3
In determining whether legislation is narrowly tailored, courts will. among other factors,
consider whether it places an unfair burden on innocent third parties.
Grutter.
539
U.S. at
324 &
341.
and it is here that we have some concerns. A court may view the Bill as placing an
unfair
burden on a contractor for whom a goal
bas
not been set under the MFD program (but proposes
.to exceed the participation goal through MFD subcontracting). because the Bill would
require
the
County to award the maximum number ofpoints to a contractor for whom a goal
bas
been set.
For example, a Hispanic owned construction firm (for whom a goal
bas
not been set in the
construction category) that proposes to exceed the participation goal through MFD
subcontracting cannot earn as many points as afemale owned construction
finn
(for whom a goal
has been set) with no proposed MFD subContracting. We are unware of any case upholding such
a program.
Nonetheless,
we
believe the Bill is constitutional because it uses MFD status as a "plus
factor," within the larger context of individualized consideration ofeach proposal on a variety of
factors. MFD status amounts to only 10% ofthe available points to be awarded· by the County.
Thus, the County will award the
vast
m~ority
ofthe available points without regard to MFD
status. Thus the Bill retains flexibility to ensure
that
each proposal is not evaluated in a way that
makes a contractor's race or ethnicity the defining feature of its proposal.
Grutter
v.
Bollinger,
539
U.S.
306,333-43 (2003).
We note. however, that the Court's approval ofusing race as a
"plus factor" occurred in the context ofan educational setting where diversity
was
viewed as an
enhancement of the education experience offered by the university. Therefore, it is uncertain
how this "plus factor" might
be
analyzed
by the courts in the context of a procurement.
Accordingly, our conclusion
that
Bill
20-16
is constitutional is not:free from doubt.
Penalty Provision
The Bill also seeks to clarify that a contract must include language that makes the
contractor's failure to submit documentation showing its compliance with a minority-owned
business subcontracting plan grounds for both: withholding any remaining payment, "and"
(rather than "or") imposing liquidated damages. We are concerned that the imposition of
liquidated damages, when combined with withholding payment,
will
lead a court to conclude
that the liquidated damages are an impermissible penalty. Therefore, we recommend that the Bill
retain the flexibility provided under current law.
Conclusion
If you have any questions regarding this memorandum, please let us know.
cc:
Bonnie Kirkland, Office ofthe County Executive
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'.
Chern
Branson
June 16.2016
Page 4
Marc P. Hansen. County Attorney
Robert H. Drummer. Legislative Attorney
Richard Melnick, Associate County Attorney
Terrilyn Brooks. Associate County Attorney
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Evaluation Criteria- Additional MFD Points
in
RFPs
1.
Overview
Montgomery County Code, §§ lIB-57 through 11B-64, as amended by Bill 48-14, requires that a
minority-owned business (MFD) be encouraged to participate in a procurement where a :M:FD
percentage goal has been set under
§
11B-60 (a) .
. Consistent with this law, the Office of Procurement has included an evaluation factor that awards
additional points (up to ten percent
(1Q%)
of the total available points assigned to the Request For
Proposals), to an offeror that: (1) has a County-recognized:M:FD certification; or (2) has no County­
. recognized MFD certification, but through subcontracting with MFD certified firms, exceeds the set,
aggregate fiscal year
(FY)
percentage goal related to the applicable purchasing category (Le.
professional services; nonprofessional services; goods; or construction) (referenced herein as "set
percentage purchasing category goal" or "participation goal").
Additional points
will
be awarded in the following manner:
(a) to an offeror that has a County-recognized MFD certification- Additional points, up to a total of 10%
of the evaluation points, may be awarded for both (i) its MFD status, and (li) its MFD subcontractor
participation, as shown in its MFD Performance Plan, in proportion to the applicable set percentage
purchasing category goal, regardless of whether the participation exceeds the set percentage goal for
MFD participation; or,
(b)
to an offeror that has no County-recognized:M:FD certification- Additional points, equal to 10% of
the evaluation points, may be awarded if the MFD Performance Plan submitted by Offeror with its
proposal shows that its :M:FD subcontractor participation
exceeds
the set percentage purchasing category
goal.
Consistent with, and subject to, the methodology noted in (a) and (b) above, an Offeror may receive
additional MFD points only
if
it has a County-recognized MFD certification or submits an MFD
Performance Plan with its proposal that supports the additional MFD points. For a list of County­
recognized MFD certifications, please see: www.montgomerycountymd.gov/mfd.
II.
Calculation Criteria
The calculation for additional evaluation points awarded under the above-stated criteria for this
solicitation is as follows:
1. Additional points must not exceed 10% ofthe total evaluation points.
2. For a listing of current FY set percentage purchasing category goals, please refer to
www.montgomerycountymd.gov/mfd.
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ID.
Eligible Categories
A.
If
the Offeror has a County-recognized MFD certification, it
will
receive additional points that
equal S% (.OS) of the total evaluation points, as well as additional points based on its:rvtFD
subcontracting participation percentage compared to the set percentage purchasing category goal
(regardless of whether the Offeror's :rvtFD participation exceeds the set percentage purchasing
category goal), in proportion to the total evaluation points.
In
this circumstance, additional points
are calculated as follow:
1) Add points equal to S% of the evaluation points (for having a County-recognized MFD
certification).
2) Add further additional points based on the:rvtFD subcontracting percentage submitted by the
Offeror, divided by the set percentage purchasing category goal, the result of which is then divided
by 10, to determine the percentage of the total evaluation points to award.
3) Total additional points is the sum ofitems l)"and 2) above, upto a maximum of 10% of the total
evaluation points.
B.
If
the Offeror
has
no County-recognized MFD certification, it
will
receive no points for its own
MFD participation. However,
if
that Offeror's MFD subcontracting participation percentage
exceeds the set percentage purchasing category goal, it
will
receive additional points equal to 10%
(.10) of the total evaluation points. The Offeror
will
not receive additional points
if
its :rvtFD
subcontracting percentage does not exceed the set percentage purchasing category goal.
IV.
Examples
The following scenarios may provide helpful illustrations of the process. For each scenario, assume the
solicitation is for professional services.
In
the professional services category, the goal for :rvtFD
participation is IS%. Additionally, assume that the total possible evaluation points are 100, so that
thel0% maximUm for additional MFD points corresponds to no more than 10 total possible points.
• Scenario
1:
The Offeror has a County-recognized MFD certification, and submitted an MFD
subcontracting plan with 16% (.16) participation (which exceeds the set 15% (.15) MFD
participation goal).
Result: 10
additional points are awarded.
Calculations:
l
[=.05 x 100] additional points for the Offeror having a County-recognized MFD
certification, and 10 points for exceeding the set participation goal: [S + 10
=J
IS points.
Accordingly, the Offeror would receive the maximum allowable 10 additional points.
• Scenario
2:
The Offeror has a County-recognized MFD certification, and submitted an MFD
subcontracting plan with 6% (.06) participation (which is less than the IS% (.IS) set participation
goal).
Result:
2.
additional points are awarded.
Calculations:
l
[=.OS x 100] additional points for the Offeror having a County-recognized:MFD
certification. Because its MFD subcontracting percentage partially meets the set participation goal,
the Offeror receives [(.06 -;- .IS) = .40 -;- 10= .040 x 100 evaluation points=l.1 additional points. The
Offeror receives a combined [S +4=] 9 additional points.
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Scenario 3:
The Offeror has a County-recognized
MFD
certification, and submitted no:MFD
subcontracting plan.
Result:
~
additional points are awarded.
Calculations:
l
[==.OS
x
100]
additional points for the Offeror having a County-recognized MFD
certification, and
Q
points for MFD subcontracting.
Scenario 4:
The Offeror has no County-recognized MFD certification, and submitted an:MFD
plan with
20% (.20)
MFD subcontracting participation (which exceeds the
IS% (.IS)
set
participation goal).
Result:
10 additional points are awarded.
Calculations:
Although the Offeror
has
no County-recognized MFD certification, it receives
10
additional points because its MFD subcontracting exceeds the
1S%
set percentage purchasing
category goal.
Scenario 5:
The Offeror
has
no County-recognized MFD certification, and submitted an:MFD
plan with
13% (.13)
minority subcontracting participation (which is less than the
IS% (.IS)
set
percentage purchasing category goal).
Result: !!
additional points are awarded.
Calculations:
Offeror has no County-recognized MFD certification, and its proposal does not
exceed the
IS% (.IS)
set percentage participation goal.
It
receives
Q
additional points.
Scenario 6:
The Offeror has no County-recognized
MFD
certification, and either submitted: (i)
no MFD plan, or (ii) an :MFD plan with a percentage of MFD participation that does not exceed the
set percentage purchasing category goal.
Result:!!
additional points are awarded. (See "Calculations" in Scenario S above).
Submits MFD plan with
16%
participation
Submits MFD plan with
6%
participation
5 points for Prime being MFD
10
points for exceeding MFD goal
Total:
10
points (Ceiling)
5 points for Prime being MFD
4 points for partial MFD participation
Total:
10
points .
0 points for
NOT
exceeding MFD
participation goal
1~
__________
~
__
-+______
~T_o_ta_I:_9~p~o_i~n~~~~
__
~.~
______
.~·~_o_ta_1_:O~po_i_nt_s~=-~~
..
Submits
NO
M FD plan,
5 points for Prime being MFD
0 pOints for
NOT
exceeding MFD
or an MFD plan with 0%
participation goa!
to
15%
p a r t i c i p a t i o n T o , ! : a l :
o
points
V.
Waiver Provisions
Prior to Contract Award, the Director, Office of Procurement, or hislher designee, may determine
whether an offeror has demonstrated good faith efforts to meet the subcontracting requirements under
County law. The Director, upon a finding that the Offeror demonstrated· good faith efforts to comply
with the subcontracting requirements, has the authority to waive, in whole or in part, the :MFD
requirement in order to permit the Offeror to remain eligible for a Contract Award.
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Fiscal Impact Statement .
Bill 20-16 - &Purehases from Minority Owned Businesses­
Euforceme:o.t of Subcontracting
Pbm-
Request forProposa)s- Amendments
1.
Legislative Summary
'lbe
proposed
legislation
will
clarify the
methOd
for awarding points for an evaluation
filctor
in
a request for proposals to inc.rease the participation ofminority owned
first
in
certain procurement contracts and require a liquidated damages clause for failing
to
comply with a minority owned business subcontracting program.
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.
The proposed legislation does.not influence revenues or expenditures.
3.
Revenue and expenditure estimates covering at least the next 6
fIScal
years.
'The proposed legislation does not influence revenues or expenditures.
4.
An
actuarial analysis through the entire amortization period for eacl1 bill that would
affect
retiree pension or group insurance costs.
The proposed legislation does not affect retiree pension or group insurance costs.
5.
An
estimate of expenditures related to County's information technol&gy
(IT)
systems, including Enterprise Resource Planning (ERP) systems.
The proposerllegislation does not affect the County's IT
systems
or ERP.
6. Later actions that may affeet future revenue and expenditures
if
the bill authorizes
future spending.
The proposed legislation docs not
authorize
future spending.
7.
An
estimate of the stafftime needed to implement the bill.
The Office of Procurement estimates
that
no additional stafftime is necessary
to
implement the proposed legislation. Procurement
staff
will review request for proposal
documentation
and
ensure
that
non-MFD contractors cannot be awarded more points than
certified MDP contractors during the bidding process. This evaluation can
be
absorbed
with
existing staff.
8. An explanation
of
how the addition ofnew staff responsibilities would affeet other
duties.
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Not applicable.
See
#7.
9. An estimate of eosts when an additional appropriation
is
needed.
The proposed legislation does not need additional appropriation and
has
no
fiscal
impact.
10. A description of any variable that could affect revenue and. cost estimates.
Not
applicable.
See
#9.
11. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not
applicable.
See
#9.
12.
If
a bill
is
likely to have no
flSCW
impact,
why
that
is
the case.
The proposed legislation states
that
non-MFD con:tractors cannot earn more points under
a
request for proposal
than a
certified MFD contractor. Procurement staffwill review
request for proposal documentation and ensure that non-MFD contractors cannot
be
awarded more points
than
certified MDF contractors during the bidding process. This
evaluation can be absorbed with existing staff.
13. Other
fiseaI
impacts or eommeuts.
None
14. The foRewing contributed to and concurred with this analysis:
Pam Jones, Office of Procurement
Grace Denno Office of Procurement
Erika Lopez-Finn, Office of Management and Budget
y
2
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Eeonomie Impact Statement
BiU 20-16, Purehases from Mmority Owned. Businesses - EBforcement of
Subcontracting Plan - Request for Proposal$ - Amendments
Baekground:
This legislation would:
• clarity the method of awarding points fur an evaluation f4ctor in a request for
proposals to increase the participation of minority owned
firms in
certain
procurement contracts. and
• require a liqttidated damages clause for failing
to
comply with
an
approved
minority ovvner subcontracting plan,
Essentially,
Bill
20-16 would
clarify
the implementation of
Bill
48-14
by
the
Executive
that has resulted in situations where a non-MEr> (Minority, Female,
and
Disabled groups)
prime contractor who agrees
to
subcontract more than the minimum MFP subcontracting
goal can
earn
more points under this evaluation factor than
an
MFD prime contractor.
According
to
the memorandum
prepar~"<i
by County Council Skiff dated May 13,2016,
Bill
20·16 would require
an
MFD prime
to
be awarded the maximum number of points
for this evaluation factor and a non.-MFD prime who agrees to subcontract more
than
the
miuimum
MFD
subcontracting goals
less
than the maximum points.
1. The sources of information, assumptions, and methodologies used.
Source ofinfomlation include the Office of Procurement (Procurement). Data
provided by Procurement compares data between October
2014 and
May
2015
(FY20
15)
before the enactment of
Bill 48-14
and data between October 2015 and
May
2016
(FY2016) after enactment of Bill
48-14.
Data include the folloVving:
• Number ofRequesl<;
for
Proposals
(REPs)
issued,
• Total number ofofferors
or
primes who submitted a proposal,
• Number ofMFD offerors,
i.e., the
number ofMFDs who submitted
a
proposal,
• Number ofawards,
• Number ofcontracts awarded to
MFD
prime, and
• Total
MFD
sub opportunities submitted by primes.
According
io
the
data,
'"more
:MFD
primes were awarded contracts after Bill
48-14
implementation." Secondly, Bill
48-14
incI\."aSed the number of MFD subcontractors
when the primes submitted proposals. Data from Procurement show that the number
ofsubcontractors increased from 26 (or 1 subcontractor out ofevery 5 offerors) prior
to Bill
48-14,
to 89 subcontractors
tor
every offeror after the enactment of BiIl
48-14.
Bill 20-16 focuses on prime contractors rath.er than subcontra,,1ors and prevents nOD­
MFD contractors from receiving five award points and requires an MFD offeror the
full allotment of points of 10 and reverses non-MFD offeror
fun
allotment
?f
points.
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Economic Impact Statement
Bill 20-16, Purcbases from Minority Owned Businesses - Enforcement of
Sube&ntracting Plan - Request for Proposals -Amendments
The unintended consequence of Bill 20-16 is that it may have a negative economic
and business impact on smaller MFD businesses whose main opportunity for
receiving government conlracts
is
through sub-contracting. TI)ese MFD
subcontractors
win
have less subcontracting opportunities from both the MFD and
non-MFD prime contractors,
because
Bill 20-16 removes or at
least
reducestlre
incentives for the MFD and non-MFD prime contractors to include MFD
subcontractors when they submit their proposals.
2. A description of any variable that could affect the ec()nomic impact estimates.
The variable
that
could affect tlre economic impact estimates are the number of
awards to
MFD
prime and MFD subcontractors under Bill 20-16 compared to the
numbcI: of awards under Bill 48.. 14. At this time, it.is difficult to measure the impact
from Bill 20-] 6 and the difference between current law and the proposed legislation.
3. The Bill's positive or negative effect, if any on employment, spending, savings,
investment, incomes, and property values
in
the County.
It
is uncertain at this time without specific data to detennine whether Bill 20-16
would have a positive or negative impact on employment, spending, investmeni,
alld
incomes in the County.
4.
If
a BUI
is likely
to have no economic
impa~t,
wby
is that the case?
It is uncertain whether Bill 20-16 would have an economic impact Please see
paragraph #3.
5. The following contributed to or concurred with this analysis:
David Platt
and
Robert Hagedoom, Finance; Grace Denno, Procurement
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