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January 21, 2018

Legal Update

The New York State Executive Budget Includes Strong Reauthorization of Article 15A, Important Changes to Personal Net Worth, Strong Workforce Development Policies, Stiff Criminal Penalties for Fronts and other Fraud

By: B. Seth Bryant

Released on January 16, 2018, the Fiscal Year 2019 New York State Executive Budget makes several strong proposals on the State’s MWBE Program, which if passed into law would reauthorize the program through 2023 with major changes.   Among other changes, the Executive Budget amendments are historic in the manner that they would strengthen enforcement tools to protect the program by deterring MWBE “fronts” and fraudulent MWBE contracting activities (such as knowingly reporting false utilization performance data) by adding new MWBE fraud misdemeanors and felonies to the State Penal Law.  

In addition, the Executive Budget proposes amending the Personal Net Worth Test by keeping the $3.5 Million cap for general purposes, but empowering the Director of the Division of Minority and Women Business Development (the “Division”) to set industry specific personal net worth levels through regulation.  Further, the Executive Budget includes proposals to expand the State’s MWBE law to all “State Funded Entities”, including counties, local governments and other entities that receive funding through State appropriation.  Currently, the State MWBE Program only applies State authorities and State contracting agencies.

The Executive Budget includes other proposals to encourage the participation of “majority firms” in the State’s MWBE Program through amendments that recognize strong “Diversity Practices” and reward firms with diverse teams of management, joint venture partners and diverse work forces. The proposed amendments also seek to reduce the administrative burden of firms that have made good faith efforts to meet MWBE goals.  

Among the State MWBE Program improvements in the Executive Budget are the following:  

1.    Requiring the Division to give final decisions on MWBE certification applications within thirty (30) days of submission of a complete certification application.
2.    Modifying the definition of small business to eliminate the general cap of 300 employees but allowing the Director to set industry specifics levels.
3.    Amending the role of the “state-wide advocate” from a position “to receive” and investigate complaints about compliance with certification delays to a position that investigates contracting issues with State contracting entities and with contractors.  
4.    Authorizing the Director to adopt regulations and programs to ensure that MWBE’s participate to the maximum extent feasible in State contracting based on (i) contract opportunities, (ii) availability of MWBEs (based on the State’s MWBE directory), and (iii) the 2016 Disparity Study.  
5.    Creating a new Workforce Diversity Program under the Executive Law that calls on the Director to establish aspirational workforce goals for minorities and women in each construction trade, profession and occupation, which State contracting agencies would use to establish workforce participation goals on their projects. Contracting parties would be expected to use good faith efforts to meet such goals.  
6.    Increasing the Discretionary Purchase thresholds for MWBEs from $200,000 to $400,000.  
7.    Amending the State Public Building Law provisions on lowest responsible and reliable bidder to direct awards to MWBE firms who qualify as responsible and reliable bidders where the bids of such firms do not exceed 110% of the lowest bid made by a responsible reliable bidder that is not an MWBE.  

Bryant Rabbino LLP © January 2018