Follow Up Review of The Minority And Women-Owned Business Enterprise Program

Executive Summary

In the year since the IGO issued the May 2010 review, the City has taken some positive steps in its administration of the MWBE program. In particular, the Office of Compliance implemented a monitoring system (called C2) that once on line will permit reporting of actual payments to MWBEs, although the accuracy of this payment data will be unverified. Additionally, the Department of Procurement Services (DPS) has developed a three-year buying plan for the City. Unfortunately, most of the fundamental problems identified in the May 2010 review remain unaddressed. In some respects, the problems have grown worse, particularly with the recent departure of the key personnel in the Office of Compliance most responsible for recent improvements to the historically abysmal administration of the program. In the meantime, since the May 2010 review, the IGO has released an additional 16 summary reports of investigations of fraud and abuse in the MWBE program, and has assisted in criminal investigations resulting in three new federal indictments relating to fraud on the MWBE program.

Addressing the problems in the MWBE program the IGO has identified in the attached review will require the commitment and leadership of the new Mayor and City Council. Specifically, the IGO recommends the Mayor and City Council consider the following:

• Redirect its focus away from MWBE certification to monitoring MWME compliance
• Accurately track and report actual payments to MWBEs
• Establish meaningful contract-specific goal setting
• Grant waivers from MWBE goals for construction contracts
• Collect penalties from firms that do not satisfy MWBE requirements
• Increase staffing in MWBE administration
• Return MWBE program administration to DPS
• Make user department contract and project management personnel accountable for the program
• Gather the necessary statistical evidence for the non-construction MWBE program to put it on sound legal footing
• End the Target Market Program

The program’s failings result in widespread fraud and abuse. This deprives legitimate firms of opportunity and restricts competition by discouraging firms that do not participate in misconduct. Despite the IGO’s work and several high-profile scandals involving the program, the prior administration did not act to effect real reform. The near collapse in the administration of the MWBE program provides the new administration and City Council with a comparatively clean slate from which to work in fixing the program. This follow-up report details changes in the program over the past year, the challenges the program still faces, and what the new administration and City Council must do in rebuilding the program to make it function effectively. We issue this report firm in the belief that the MWBE program can still be a valuable City asset in leveling the playing field for groups historically victimized by discrimination by providing economic opportunities that have not been available to them in the past.