Audit Report on the New York City Department of Design and Construction’s Administration of the Minority- and Women-owned Business Enterprise

EXECUTIVE SUMMARY

The objective of this audit was to determine whether the New York City (City) Department of Design and Construction (DDC) complied with key Minority- and Women-owned Business Enterprise (M/WBE) Program provisions of Local Law 1 of 2013 (LL1).

DDC manages a design and construction portfolio for the City’s capital program valued at approximately $10 billion.  As the City’s primary capital construction manager, it is responsible for overseeing the construction of many of its civic facilities.  In 2005, Local Law 129 (LL129) created the City’s M/WBE Program, which was superseded and modified by LL1.¹  In accordance with LL1, the City establishes percentage goals for M/WBE utilization that City agencies are expected to meet in their procurements of contracts in the following categories: professional services, standard services, construction and goods.  The M/WBE Program aims to increase M/WBE contracting opportunities by maximizing access to bids or proposal opportunities for prime contracts.

The M/WBE Program is administered jointly by the Department of Small Business Services (DSBS) and the Mayor’s Office of Contract Services (MOCS).  The two agencies jointly issue the M/WBE Program Annual Report each fiscal year, as well as interim quarterly M/WBE Program Compliance Reports (quarterly compliance reports) after each of the first three quarters in a fiscal year.  These reports, along with the annual MOCS’ Agency Procurement Indicators (API) report, summarize City-certified M/WBE program activity, prime contract and subcontract utilization data, as well as additional data specified in §6-129 of the New York City Administrative Code.²  In order to compile these reports, MOCS pulls data from the City’s Financial Management System (FMS).³

To help City agencies increase their awards to M/WBEs, MOCS has issued the M/WBE Policies, Procedures and Best Practices manual (MOCS Manual) to each agency’s M/WBE Officer and Agency Chief Contracting Officer (ACCO).⁴  The MOCS Manual provides guidelines and best practices for LL1 compliance and standardized LL1-related forms.  LL1 requires City agencies to develop and submit an M/WBE Utilization Plan each fiscal year to DSBS.⁵  LL1 also requires that agency M/WBE Officers monitor their agencies’ procurement activities to ensure utilization goal compliance and to assess progress towards an agency plan’s participation goals.

Audit Findings and Conclusion

This audit found that DDC has: (1) an M/WBE Compliance Unit responsible for monitoring prime contractor M/WBE compliance with LL1; (2) agency-wide M/WBE utilization goals; (3) justification for not adopting the city-wide M/WBE utilization goals; and (4) adequate documentation for denying or approving proposed bidders’ waiver requests.

However, we nonetheless found weaknesses in DDC’s monitoring to ensure that prime contractors meet their M/WBE goals.  Among other things, we found that DDC does not maintain a centralized monitoring and tracking system that lists all contractors with contracts subject to LL1.  Further, we found that DDC did not record in FMS all required information for contracts subject to M/WBE participation goals.  In addition, we found that many of the FMS Contract Goals Header entries were not made in a timely manner.  We also found insufficient evidence that DDC monitored the prime contractors’ use of M/WBEs for those contracts having M/WBE participation goals.

For our sampled contracts, there was insufficient evidence documenting DDC’s review of the prime contractors’ records to verify payments made to M/WBE subcontractors; insufficient evidence that job-site inspections were performed to verify the use of M/WBE subcontractors in projects; and no evidence that audits were conducted on the prime contractors’ books and records.  We also found that of the 10 prime contractor utilization initiatives that we sampled, two were not performed; specifically, DDC did not advertise procurement opportunities in minority publications and it did not create a formal means of tracking M/WBE utilization and sharing information within the agency.

We believe that the deficiencies identified in the report are largely due to DDC failure to develop and implement an authoritative set of standard procedures governing LL1 requirements.  These deficiencies inhibit DDC from effectively assessing its compliance with its agency-wide M/WBE utilization goals and its prime contractors’ compliance with established participation goals.

Audit Recommendations

Based on our findings, we make nine recommendations, including the following:

• DDC should develop and maintain a centralized tracking and monitoring system for contracts subject to LL1 that permits monitoring efforts to gauge the prime contractors’ progress towards achieving their M/WBE goals.
• DDC should ensure that all prime contracts and subcontracts are accurately entered into the applicable FMS tables in a timely manner.
• DDC should monitor and document prime contractors’ efforts to achieve their M/WBE utilization goals by verifying payments made to M/WBE subcontractors.
• DDC should perform and properly document job-site inspections to ensure M/WBE subcontractor performance and utilization, contact M/WBEs identified in the plan to confirm their participation and audit the contractors’ books and records.
• DDC should establish a formal means of monitoring its procurement activities to ensure compliance with the agency’s utilization plan and to monitor its progress towards meeting the participation goals established in its plan.
• DDC should immediately develop and disseminate detailed written procedures to key personnel that address all LL1 requirements.  These should include, but are not limited to, personnel responsibilities and FMS entries of LL1-applicable contract information and detailed documentation requirements to help ensure DDC’s compliance with the law.

 Agency Response

DDC agreed with the audit’s nine recommendations.  In its response, DDC states that “[it] is fully committed to the success of the City’s M/WBE program and to any recommendations that will result in improving our process of this important program.”