Comptroller Stringer: Annual Making the Grade Report Reveals 80 Percent of M/WBE City Agency Grades Declined or Remained Stagnant

(New York, NY) – Today, New York City Comptroller Scott M. 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. The Comptroller announced that the City earned its second passing “C” grade after four consecutive years of “D+” grades. This year’s report analyzed the acute impact of the COVID-19 pandemic and subsequent economic shutdown on New York City’s M/WBE community, after 85 percent of M/WBEs reported in a July 2020 survey that they could not survive the next six months.

“As thousands of businesses struggle to stay afloat amid the economic fallout of COVID-19, it is painfully clear that the pandemic is disproportionately hurting M/WBEs. A long history of systemic inequality and exclusion is being compounded by COVID-19 and if we want an equitable recovery, we can’t stand idly by,” said Comptroller Stringer. “It is a failure of government that, in the face of our M/WBE community’s severe economic distress, the City showed little to no improvement toward reaching M/WBE spending goals this year.  As we work to rebuild our economy, we must ensure that the local engines of wealth creation—our minority and women businesses owners—have the tools, resources, access and opportunities to participate and share in that recovery.  Our economy is strongest when it is inclusive and representative of our city’s diversity.”

“Making the Grade,” published annually since 2014 by the New York City Comptroller, evaluates the performance of the City’s M/WBE program and makes recommendations for its improvement. “Making The Grade” assesses 32 City agencies – and the City overall – on progress in spending with minority and women-owned businesses (M/WBEs) and is a diagnostic tool for agencies to improve performance and transparency in M/WBE spending, increase competition in City procurement and save taxpayer dollars.

Highlights in the 2020 “Making the Grade” report include: 

• The City awarded $22.5 billion in contracts in FY 2020, of which only $1.1 billion (equal to 4.9 percent) were awarded to M/WBEs.
• Over the last seven years, the share of M/WBEs receiving City dollars has not exceeded 22 percent. In FY 2020, 82 percent of M/WBEs did not receive any spending from the City.
• For the first time, the City exceeded $1 billion with M/WBEs in FY 2020, an additional $93 million from FY 2019.
• The City earned its second consecutive “C” grade for M/WBE spending in FY 2020.   Broken down by category, it earned an “F” with African Americans, a “D” with women, a “B” with Hispanic Americans, and an “A” with Asian Americans.
• Three mayoral agencies earned “A” grades: the Commission on Human Rights, Department for the Aging, and the Department of Youth and Community Development, all of which spent more than 50 percent of their Local Law 1-eligible dollars with M/WBEs.
• NYC Emergency Management, received an “F” grade, spending less than 4 percent of its Local Law 1-eligible dollars with M/WBEs.
• In FY 2020, 21 grades remained the same, six agencies improved their grades, and five agency grades declined; this means that 80 percent of agency grades either were stagnant or declined.
• The Comptroller’s Office earned an “A” grade. Over the last seven years, the Comptroller’s Office increased its M/WBE spending from 13 percent to approximately 50 percent, with a 13 percent point increase just in the last year. By contrast, the City increased its spending from six percent to 16 percent since FY 2014—just a ten percent increase in seven years.

Utilization of M/WBEs During COVID-19

In July 2020, the New York City Comptroller’s Office surveyed 500 M/WBEs on the impact of COVID-19 and found that 85 percent of M/WBEs projected less than six months of survival given their cash on hand at the time of the survey. Although 65 percent of M/WBEs expressed being ready, willing, and able to assist in the City’s response efforts, only 62 M/WBEs surveyed actually competed for a contract and only 10 received a contract.

This report follows up on that survey, finding that:

• Between March and August 2020, the City spent over $1.5 billion in COVID-19-related goods and services contracts, yet only 11 percent, or $168.5 million, went to M/WBEs.
• The City only spent about $17.5 million, or one percent with Black American-owned firms; and about $15.7 million, or one percent, with Hispanic American-owned firms.
• Three agencies made up more than 80 percent of the City’s COVID-19 related spending and each had limited M/WBE utilization: The Department of Citywide Administrative Services, The Department of Sanitation, and NYC Emergency Management.
• Three entities have spent $0 in COVID-19 related procurement with M/WBEs: Health + Hospitals Corporation, the Office of the Mayor, and the Department of Parks and Recreation.
• Nine agencies have spent more than 30 percent of COVID-19 related expenses with M/WBEs: the Department of Correction, Department of Environmental Protection, Department of Transportation, Law Department, Administration for Children’s Services, Department of Youth and Community Development, Department of Education, Department of Health and Mental Hygiene, and the Police Department. Notably, these agencies’ combined spending only comprised four percent of the City’s COVID-19 dollars.

The Department of Education’s Missed Opportunity to Do Business with M/WBEs

The New York City Department of Education spends over $4 billion annually, more than any agency analyzed in the Making the Grade report.

• In FY 2020, less than six percent of their $4.3 billion in spending, or $232.3 million, went to M/WBEs.
• DOE’s spending was divided among more than 8,000 vendors. However, the top 50 recipients of DOE procurement dollars—all non-M/WBEs —received $1.8 billion, or about 42 percent of all DOE spending.
• A search of the City’s M/WBE directory yields M/WBEs in every one of DOE’s top procurement industries, representing a missed opportunity to do business with M/WBEs.

Recommendations

Each year, this report puts forth recommendations meant to reduce barriers and increase opportunities for M/WBEs. These recommendations are informed by needs identified by the Comptroller’s COVID-19 M/WBE survey, as well as a series of focus groups.

Comptroller Stringer recommends that:

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 the supply chain in the City of New York 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. Upfronting overhead costs is established precedent in many types of contracts. 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. As a matter of course, any new or expanded payment policies should mirror due diligence practices to protect taxpayer dollars.

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. This is especially critical because of the White House’s recent defunding of anti-racism trainings for federal employees.

Federal, state, and local governments should revive M/WBE programs by creating set asides and tying M/WBE goal outcomes to cabinet-level performance. All M/WBE programs are based primarily on two Supreme Court decisions, City of Richmond v. J.A. Croson Co. (Croson) and Adarand Constructors Inc. v. Peña (Adarand), which require cities to calculate availability and utilization of M/WBEs in their local market. These cases have led to the goal-based, aspirational programs that we see nationwide. However, while these policies have created some access, they have been unable to address systemic racism in government more broadly. As a result, as Comptroller Stringer’s Office has shown over the last six years, the needle has not moved: M/WBEs still only receive five percent of New York City contract dollars. In order to truly address inequities in government contracting, cities need to address societal racism more broadly and that requires action from federal, state, and local governments and the Supreme Court. State and local governments should create programs that consider the M/WBE market first. For example, Ohio has a program to set aside 15 percent of purchases each year where only M/WBEs can compete, with no limit on any given contract amount. In addition, governments should take steps to hold their decision makers accountable by tying M/WBE goals to their employee performance evaluations and establish improvement processes when decision makers underperform.

Chief Diversity Officers and Accountability for M/WBE Goals in Contract Registration

For the past six years, Comptroller Stringer has called for a Chief Diversity Officer in City Hall and within every City agency to serve as executive-level diversity and inclusion strategists driving the representation of people of color and women across government. In July 2020, Mayor Bill de Blasio signed an executive order to appoint Chief Diversity Officers in every City agency.  The executive order also implements recommendations included in this report in past years, such as expanding M/WBE-eligible contracts, re-evaluating subcontracting goals, and breaking up large contracts.

Comptroller Stringer announced new transparency and accountability measures in the contract registration process requiring the City to provide documentation, such as goal-setting worksheets and market analysis, on M/WBE goals in City contracts. In light of the City’s goal of awarding at least 30 percent of the dollar amount of City contracts to M/WBEs by 2021, these measures will provide clarity and insight into the City’s M/WBE contracting targets and help identify areas for improvement.

To read the full report, click here.

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