From 1985 to 2006, New York State's Minority and Women-Owned Business Enterprises (MWBE) program suffered from inefficiency and neglect. Under Governor Pataki’s Republican leadership, the MWBE program became essentially nonexistent and, by the end of his last term in 2006, MWBE's received only three percent of the total $11 billion of state contracts.
Despite the Pataki administration's lack of focus, the rejuvenation of the MWBE program became a central issue in New York's 2006 gubernatorial race. During then Governor-to-be Eliot Spitzer and then Lieutenant Governor-to-be David Paterson's campaign, the two Democratic candidates adamantly professed commitment to revamping the program, assuring voters that the issue would be at the top of their agenda if elected.
"If Eliot Spitzer and I win in November, we are going to break down the barriers to opportunity for MWBEs and change the culture of our government. I am absolutely committed to developing MWBEs in New York after a twelve-year period of abuse and neglect," Paterson said in a speech during the campaign.
In the same address, Paterson outlined the Spitzer-Paterson campaign's plans for the MWBE program in detail. They promised to provide leadership at the executive level, enhance the capacity of MWBEs to participate, provide focus on creating market opportunities, create effective management systems, and commission a disparity study that will provide guidance for future MWBE policies. Now, just over a year after their election into office, DBE Goodfaith will examine, evaluate and review Spitzer and Paterson's success in fulfilling their MWBE campaign promises. Just as importantly, we will examine the potential for continued reform in light of former governor Spitzer’s the recent scandal and subsequent resignation.
Promises: In their plan, the two candidates declared that once in office they would:
· Issue an executive order outlining their commitment to support New York's Minority and Women Owned Businesses
· Establish guiding principles for MWBE utilization
· Urge the compliance of state agencies with existing legislation
· Support the establishment of an Executive Leadership Council to monitor the state agencies in their MWBE program participation
· Support Community Benefit Agreements, which promote economic development and provide opportunities for MWBE participation in economically stagnant or depressed communities.
Actions: Spitzer and Paterson hit the ground running, issuing Executive Order No. 8, which created the Executive Leadership Council and a Corporate Roundtable, only a month after assuming office. The Executive Leadership Council is responsible for identifying best practices for state agencies to promote MWBE business participation. The Council is also charged with identifying regulatory obstacles that are counter to the goals of the MWBE program, recommending policies that will facilitate inter-governmental cooperation, and assisting state agencies with their efforts to achieve the goals of the program.
The order also establishes the Corporate Roundtable, which will review the MWBE program and its implementation. It will make recommendations regarding the use of technology in facilitating and tracking MWBE contracting and it will set the MWBE utilization goals. These goals are very important to contractors and businesses that do business with the State of New York; these goals are used by state agencies that require contractors to find and utilize MWBE firms in their project bids and RFPs submitted to the state and local government. Other roles that the Roundtable may assume include the supervision and tracking of MWBE participation in state contracts for statistical purposes and the training of state procurement officers to ensure that they abide by the MWBE program's guidelines.
Assessment: Even though Spitzer issued this executive order, he never got around to writing a comprehensive plan that outlines the details necessary for executing these policies. By founding these two councils, however, he has created organizations that are able to authoritatively recommend policies and provide guidance for future reforms to New York’s MWBE program.
At the end of 2007, the Empire State Development Corporation (ESDC), which is the quasi-public agency responsible for implementing the MWBE program, reported that they had received from the Executive Leadership Council and the Corporate Roundtable a document detailing a number of recommended best practices. The recommendations have been well received – Executive Director of the Division of Minority and Women's Business Development Michael Jones-Bey expressed his confidence that these practices will be adopted.
Promises: On the stump, Spitzer and Paterson vowed to “break down the barriers of opportunity for MWBEs.” In order achieve this goal, they proposed to institute a Mentor-Protégé Program to help teach MWBEs management and technical skills, partner them with experienced businesses willing to mentor, and organize networking opportunities. They also assured voters that their administration would enhance the competitive capacity of MWBEs by building partnerships between program participants and banks, bonding companies, and major corporations. Spitzer and Paterson focused especially on collaborating with the banks, who they believed could be persuaded to make loans to small and new businesses that do not usually qualify for loans.
Actions: In September 2007, Paterson announced a new statewide initiative aimed at helping MWBEs gain access to bonding and training. Paterson and the leaders of the Bonding and Surety industry signed an agreement that established a pilot bonding program for 30 MWBE firms in New York State. Along the lines of the agreement, each business will receive training from industry executives and technical assistance in areas ranging from management and financing to business plan development and loan packaging. During the pilot program, the New York Division of MWBE Development will identify and approach additional financial institutions regarding participation in a bonding assistance program.
Assessment: The cooperation between the Spitzer Administration and the financial community will undoubtedly make it easier for New York State to respond to the issue of MWBE bonding. Even more, the results of the pilot bonding program will allow the executive office to act with prudence and foresight when formulating its next phase of MWBE bonding policies. However, the administration’s lack of action regarding the creation of an MWBE mentor-protégé program, despite the New York State Legislature’s repeated attempts to pass a bill establishing such a program, is disappointing. In other states, mentor-protégé programs have proved to be worthwhile and effective. Still, given that Spitzer and Paterson successfully negotiated with the financial establishment within a year of taking office, we can pardon their inaction on the mentor-protégé program for the moment.
Focus on Market Opportunities
Promise: According to Paterson, a Spitzer Administration would take steps to improve online access to contract opportunity information, expand the scope of the MWBE program to include financial sectors, discover ways to increase opportunities for MWBEs on projects receiving state subsidies, and support MWBE inclusion on private sector contracts.
The increased access and availability of contracting information is meant to help MWBEs find business opportunities in addition to simplifying the process of finding qualified MWBE firms for state agencies’ and non-minority businesses. To achieve this goal, Paterson says that the MWBE Division will be required to enhance the online database’s search capabilities and the information available. Even further, Spitzer-Paterson would order the Division to provide state agencies with a list of MWBEs capable of performing work pertinent to that agency on a quarterly basis.
Action: When examining the MWBE Division webpage, there is no evidence that the administration’s campaign promises have been implemented. The only place where businesses can search for contracts are the websites of the New York State Contract Reporter, which costs $99 annually to access, and the Office of General Services – neither of which is linked from the MWBE Division homepage.
Assessment: While work may be ongoing behind the scenes, there is no indication that the Spitzer administration has made any significant progress to enhance MWBE access to market opportunities.
Effective Management Systems
Promise: Considering the MWBE program’s mismanagement and lack of oversight under Pataki, Paterson promised to develop a bureaucratic culture that values transparency, monitoring, accountability, efficiency, and enforcement; no longer would the MWBE program be marred by certification delays and overdue annual reports from the MWBE Division.
Actions: After conferring with the Executive Leadership Council in spring 2007, Paterson determined that the MWBE Division would issue quarterly report cards to monitor state agencies’ performance regarding MWBE utilization requirements and identify areas where transparency and efficiency can be improved.
Assessment: Bureaucracies are notorious for their lack of enthusiasm when it comes to deviating from the status-quo. However, with proper leadership the bureaucratic ship can be brought to change course. While the verdict is still out on whether the new policy will affect any change, it can be sure that Paterson, the self-proclaimed “enforcement individual” in the executive office, will harass noncompliant state agencies.
Generating Disparity Studies
Promise: During the 2006 campaign, Paterson said that once he and his running mate were elected into office, New York State would commission a disparity study to assess whether a significant disparity between the number of qualified MWBEs and their expected procurement of state contracts based on their availability exists.
Action: The Empire State Development Corporation (ESDC) has commissioned NERA Economic Consulting to conduct a statewide disparity study. The findings will help the ESDC and the Spitzer Administration determine which MWBE-related polices will assist the economic development of MWBEs, increase their competitiveness in their related markets, and provide them with the business management skills necessary for success. The study’s estimated completion date is spring 2008.
Assessment: The candidates promised to undertake a disparity study so that they could make informed policy decisions and justify changes to the MWBE program. They have unequivocally delivered on this campaign pledge.
On the whole, the Spitzer Administration made great strides in its effort to rejuvenate New York’s MWBE program in its first year. Aside from its lack of progress on enhancing market opportunities, the executive office has started to address many of the MWBE program’s prior shortcomings.
Overall Grade: B+
Spitzer’s resignation last week, a result of his patronage of a high-end prostitution ring, has created concern regarding whether the former administration’s dedication to MWBE program reform will continue under the new leadership. Following Spitzer’s resignation, Paterson, the driving force behind last year’s MWBE program reforms, replaced Spitzer as New York governor and New York Senate Majority Leader Joseph Bruno, a Republican, automatically assumed the vacant Lieutenant Governor position. As a minority himself, Paterson’s has built extensive contacts with the state’s minority communities and will likely continue to be an advocate of their concerns.
Bruno, on the other hand, has significant policy differences with the new Governor and it is unsure how the two will work together regarding MWBE reform. At the same time, Bruno has a strong record of bipartisanship, frequently reaching across the aisle to work with New York Assembly Speaker Sheldon Silver to pass bills in the legislature. With this in mind, there may be room for the two to cooperate on the issue of MWBE reform.