Comptroller Stringer Analysis: 50 Percent of M/WBEs Were Forced to Lay Off or Furlough Employees During COVID-19 Pandemic

(New York, NY) – Today, New York City Comptroller Scott M. Stringer released a comprehensive analysis of the economic impact of COVID-19 on minority and women-owned businesses (M/WBEs) one year into the pandemic, revealing severe barriers to financial relief and exclusionary COVID-19 contracts. According to the survey of 503 businesses, 50 percent of M/WBEs were forced to lay off or furlough employees and although 87 percent of M/WBEs that applied for relief received funding through the federal Paycheck Protection Program, it has not been enough to support businesses in the long term. In addition, more than 30 percent will be unable to pay rent in the next three months.

Of the 154 M/WBE respondents that competed for City contracts during COVID-19, just 53 M/WBEs (34%) received a contract. City-certified M/WBEs were able to access COVID-19-related business relief funding mostly from the federal government.

The analysis follows a June 2020 survey of more than 500 City-certified M/WBEs that found 85 percent of M/WBEs believed they could not survive for six more months.

“Thousands of businesses are still struggling to stay afloat amid the COVID-19 pandemic and economic crisis, especially those owned by women and people of color,” said Comptroller Stringer. “Make no mistake: there is no economic recovery for New York City without the minority and women-owned businesses that generate strong local community wealth and are at the core of our city’s cultural identity. We will redouble our commitment to holding City agencies accountable and continue our efforts to identify and dismantle systemic barriers to participation. If we’re going to make an equitable comeback from this pandemic, we must ensure our economy is truly inclusive and reflects the diversity that is New York City.”

The survey results highlight M/WBEs’ most urgent challenges and needs as New York City begins to reopen and recover:

Challenges Facing M/WBEs Due to Pandemic Shutdowns

• 95% of M/WBE respondents are still operating. Of those still operating, 56% can only expect to operate for another 6 months or less.
• 50% of M/WBEs have had to lay off or furlough employees.
• Of those that had to lay off or furlough employees, 95% did not utilize the NYS Department of Labor’s Shared Work program to cover the costs because they either did not know it existed (62%) or felt that the program didn’t serve their business’ needs (25%).
• Of the M/WBEs that had to lay off or furlough employees, 38% were in Manhattan, 23% were in Queens, 23% were in Brooklyn, 12% in the Bronx, and 4% in Staten Island.
• Of the M/WBEs that had to lay off or furlough employees, 37% were in professional services, 33% were in construction, 16% were in goods, and 14% were in standard services.
• 38% of M/WBE respondents have had to cancel contracts with freelancers.
• 31% of M/WBEs project not being able to pay rent in the next 3 months.
• 64% of M/WBEs have pivoted their businesses during COVID-19 and focused on changing or expanding the services or products they provide (162 M/WBEs), pivoting to online sales (94 M/WBEs), and selling to a new market or audience (90 M/WBEs).

Ability to Access City Contracts

• 154 M/WBE respondents competed for City contracts during COVID-19. Of those that competed, just 53 M/WBEs (34%) received a contract.
• City-certified M/WBEs were able to access COVID-19-related business relief funding mostly from the federal government.
• 78% of M/WBE respondents applied for COVID-related relief from government. Of those that applied for funding, 88% received it.
• 87% of those that received COVID-related relief received federal Paycheck Protection Program (PPP) funds.
• 53% received federal Economic Injury Disaster (EIDL) funds.
• Just 6 M/WBEs reported receiving the New York State Forward Loan, 7 reported receiving the NYC Business Continuity Loan, and 8 reported receiving the NYC Employee Retention Grant.
• 20% (82) of M/WBE respondents applied for COVID-related funding outside government resources, and 26 M/WBEs (32%) of those who applied received funding.

In light of these findings, the Comptroller recommends:

• City and State programs should emulate Philadelphia’s COVID-19 Small Business Relief Fund by prioritizing allocation of federal resources to M/WBEs, heavily impacted industries, and businesses that are located in low income and high poverty areas.
• The City and State should allocate federal funds to provide relief to employees of small businesses who were laid off during the pandemic.
• The City and State should emulate CUNY’s Internship to Employment (I2E) program to create a University to M/WBE Pipeline Program. This program will help bolster heavily impacted businesses while also providing employment to recent college graduates.

In December 2020, Comptroller Stringer released the annual “Making the Grade: New York City Agency Report Card on M/WBEs” report, finding that M/WBEs continue to face structural inequities and barriers to opportunities as 80 percent of City agency grades measuring M/WBE spending and transparency either remained stagnant or declined since last year. Comptroller Stringer issued recommendations to reduce barriers and increase opportunities for M/WBEs, including:

• The Mayor’s Task Force on Racial Equity and City Hall should develop a targeted plan to address areas where there is low M/WBE utilization even with M/WBE availability: spending within the Department of Education, COVID-19-related procurements, and the M/WBE Small Purchase Method.  It is clear that City’s supply chain needs to be closely examined with an eye toward reforming key imbalances in M/WBE spending at every step in the process. For example, in order to take full advantage of the M/WBE Small Purchase Method, the City should review the procurements needs of each agency. For every upcoming procurement below $500,000, including new and renewal contracts, the City should identify M/WBE Small Purchase opportunities.
• The City should establish an initiative to pay M/WBEs and small businesses for their upfront overhead costs. As women and people of color face uncertain futures and small businesses across the country are closing their doors, the City should implement payment policies that support its vendors’ sustainability. The City should make payments for upfront overhead costs available to more vendors including M/WBEs and small businesses with contracts in the professional services, standard services, and goods industries.
• The City should require transparent timelines for RFP awards and notify vendors that did not receive awards of their option to debrief. Vendors currently wait for several months or even over a year for RFP results. This costs M/WBEs valuable capital and time to maintain the staff and equipment required for such contracts without knowing if and when their goods and services will be needed. The City should require all agencies to provide transparent timelines for procurement awards to all proposers. In addition, the City should notify each individual vendor that did not win the award of their rejection and offer a debriefing to provide vendors with much-needed feedback as they continue to seek government dollars.
• City Hall should immediately sign an executive order requiring unconscious bias training for all employees, or else the City Council should mandate it. The City currently offers these trainings on an optional basis, but there is no standard requirement for all employees. Using existing resources at the Department of Citywide Administrative Services Training Center and Office of Citywide Equity and Inclusion, the City should train every public servant in addressing their unconscious biases to ensure that the City’s everyday interactions improve the lives of all New Yorkers, including reducing contracting barriers facing the M/WBE community.

To read the full analysis, click here.

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