By PHILLIP ROSS, CPA, CGMA, PARTNER
and BRIAN SANVIDGE, CIG, CFE, PRINCIPAL
On July 15, 2019, New York Gov. Andrew Cuomo reauthorized the Executive Law Article 15-A to extend it until Dec. 31, 2024. Originally signed into law in July of 1988, this law seeks to level the playing field for minority and women-owned business enterprises (MWBEs) by establishing goals for MWBE involvement in construction projects. The newest participation goal is 30% of the budget for each year of your grant and is established based on the results of a 2016 disparity study.
According to Article 15-A, MWBEs must be at least 51% owned by minority members and/or women, and independently owned, operated and authorized to do business in New York State.
The MWBE goals set forth in Article 15-A apply to construction projects that involve an application for a grant of more than $25,000.
”˜Good Faith Efforts”™
to Comply
The most important change made by this legislation is that contractors must now demonstrate a “good faith” effort to comply with the MWBE requirements of the law. Good faith efforts can include the identification of participation areas for MWBEs and full utilization of lists of certified MWBEs. These efforts must be documented using the MWBE Contractor Good Faith Efforts Certification Form 105.
If, despite good faith efforts, a contractor is not able to retain an MWBE for a project, the company must submit a Request for Waiver along with documentation of good faith efforts and the reason they were unable to obtain an MWBE.
Good faith efforts could include:
- ”‚Copies of solicitations (advertisements in MWBE-centered publications, those made to vendors in MWBE directories, those made to MWBE-oriented trade and labor organizations, etc.)
If these solicitations are answered, the contractor must also record specific reasons why the MWBE enterprise was not selected.
- ”‚ Dates of attendance at meetings.
- ”‚Information describing the steps taken to ensure MWBE participation in a project.
- ”‚Descriptions of any other actions undertaken by the bidder to document good faith efforts to retain MWBE enterprises.
There are three ways to comply with the MWBE policy set forth in Article 15-A. Although full participation compliance is the preferred method, partial or no participation is acceptable so long as the contracting agency conforms to the requirements to fulfill and receive the waiver.
- Full participation is achieved when the applicant meets or exceeds the 30% participation goal set forth in the legislation.
- Partial participation is acceptable only if good faith efforts to comply are made and properly documented, but the goal was not met. The reasons for not meeting the goal must also be documented and submitted along with the Request for Waiver.
- No participation is like partial participation, and only acceptable if good faith efforts have been made but no MWBEs were able to be obtained for this project. Efforts to obtain an MWBE must also be documented and submitted along with the Request for Waiver.
Many contracting agencies opt to engage monitoring firms to ensure that good faith efforts are met and properly documented and to avoid penalties.
If you as a general contractor are found in violation of Article 15-A, you may face the imposition of fines, sanctions or penalties. Penalties may also include a determination that the contractor will be ineligible to submit a bid to any contracting agency or be awarded a contract for up to one year.
Additionally, as of the 2019 extension, contracting agencies were required to establish four-year growth plans regarding the utilization of MWBEs. These added levels of transparency are intended to necessitate additional outreach and the need for documentation of all activities.
Also, this legislation expanded the role of the Statewide Advocate, whose authority and responsibilities now range from assisting MWBEs in obtaining business assistance and investigating complaints concerning certifications delays, to auditing agencies and investigating complaints from MWBEs regarding violations of 15-A.
Article 15-A Will Also
Affect MWBEs.
Meanwhile, for MWBEs, the legislation has increased the personal net worth cap for owners to $15 million from $3 million, which will have a significant impact on the program capacity. In order to remedy the current certification backlog, the legislation has extended the certification from three to five years. Lastly, MWBE bidding credits of 10% up to $1.4 million have been established for low-bid construction projects.
Ensuring complete compliance with Article-15 A can be difficult. If you have any questions about Article 15-A, contact your attorney or CPA.
About the authors: Phillip Ross, CPA, CGMA is an Accounting and Audit Partner and Chair of the Construction Industry Group at Anchin, Block & Anchin, LLP. Brian Sanvidge, CIG, CFE, is the Principal and Leader of Regulatory Compliance and Investigations of Anchin”™s Litigation, Forensic and Valuation Services Group. For more construction industry thought leadership and content, log on to www.anchin.com.
