Review of the MWBE Program

Executive Summary

Our investigations and analysis have revealed broad and pervasive deficiencies in the administration of the City’s MWBE program, and that the City cannot determine whether or not the program is achieving its goals. As a result, the program has been beset by fraud and unlawful brokers, and MWBE participation is likely far less than the publicly reported participation statistics. Specifically, the IGO found that:

• Fraud, abuse, and mismanagement are widespread in the MWBE program. Recent sustained or soon to be sustained IGO investigations into the MWBE program have involved contractors that have been awarded over $1 billion in City contracts since 2003.

• Our analysis of construction contracts that ended in 2008 found that actual payments to MWBEs and Disadvantaged Business Enterprises (DBEsi were over 15 percent less (more than $19 million) than the City’s publicly reported statistics for the contracts we reviewed. Were the over-reporting for 2008 applied to the over $2.5 billion in construction contracts reportedly awarded to MWBEs and DBEs since 1995/ actual participation in all the City’s construction contracts, between 1995 and 2008, has been $400 million less than the City’s publicly reported participation statistics.

• Non construction contracts comprise the majority (70% of the dollar value) of reported MWBE participation awarded since 1995. For these contracts, due to the historical lack of auditing of non-construction participation, the lack of rigor in the auditing process that was recently put in place, and the prevalence of fraud and abuse in the program, it is likely that actual participation is also significantly lower in non-construction than the publicly reported participation.

• Many of the problems in the MWBE program are attributable to the City’s poor administration of the program. Specifically, the administrative deficiencies include:
o Not collecting, analyzing, or reporting data on actual payments to MWBEs.
o Lack of cooperation between City departments in administering the program.
o Failure to track payments to MWBEs as contracts are performed.
o Mistakes in assessing actual MWBE participation.
o Laxness in determining eligibility for the program. o Insufficient resources devoted to the program’s administration.

The City’s failure to collect all relevant data, its inconsistent application of the program’s rules and regulations, and a lack of cooperation between the user departments and the Department of Procurement Services (DPS)4 have all contributed to the program’s poor administration. Despite a lawsuit challenging the program’s constitutionality and several high-profile scandals involving the program, these failings have not been corrected. The MWBE program requires continuous oversight and analysis, yet the City has failed to successfully address the program’s problems as they have arisen.