Audit Report On The Compliance Of The Department Of Design And Construction With The Minority- And Women-Owned Business Enterprise Program
AUDIT REPORT IN BRIEF
We performed an audit on the Department of Design and Construction’s compliance with the key provisions of the Minority- and Women-Owned Business Enterprise (M/WBE) Program that was established under Local Law 129 in 2005. The aim of the program is to promote the utilization of M/WBE firms for contract and subcontract opportunities valued at less than $1 million.
The agencies overseeing City prime contracts that have M/WBE subcontracting goals (set by the agency) are required to monitor the compliance of the prime contractors with their plans to use subcontractors and M/WBEs (i.e., their utilization plans). Local Law 129 requires agency M/WBE officers to monitor contractor compliance by appropriate means, including inspecting jobsites, contacting M/WBEs identified in utilization plans to confirm their participation, and auditing contractors’ books and records.
The Department of Design and Construction (Department) manages the design and construction of new and renovated City facilities such as firehouses, libraries, and courthouses. According to the Agency Procurement Indicators reports, which are published by the Mayor’s Office of Contract Services and contain information about M/WBE utilization, the Department awarded 316 prime contracts totaling $3,081,816,027 for which the Department established M/WBE subcontracting participation goals during Fiscal Years 2007 through 2010.
Audit Findings and Conclusions
The Department has partially complied with key provisions of Local Law 129 and §6-129 of the Administrative Code. Specifically, the Department has designated an executive officer to act as the agency M/WBE officer, created agency utilization plans, and ensured that prime contractors select M/WBE subcontractors from a pre-qualified list established and verified by the Department of Small Business Services.
Despite these steps, the Department has not complied with the provisions of Local Law 129 that pertain to monitoring the agency’s activities to ensure that the agency utilization plans are effectively carried out. Thus, the Department does not monitor the actual participation of M/WBE prime contractors and subcontractors that were awarded contracts with utilization goals. The Department does not review the records of prime contractors to verify that payments were made to M/WBE subcontractors, does not perform job site inspections, and does not contact M/WBE subcontractors to verify their participation. By failing to adequately monitor compliance with agency utilization goals, the Department cannot fully assess whether prime contractors have complied with contract requirements, are providing business to certified M/WBEs, and are achieving the utilization goals specified in the contracts. Without this information, the Department cannot ascertain whether the program is effectively contributing to the City’s use of certified M/WBEs as intended by Local Law 129. These problems can be attributed to the Department’s failure to establish and implement written procedures to ensure compliance with the law.
Furthermore, the data that is publicly reported by the Mayor’s Office of Contracts about M/WBE subcontractor participation goals is based on anticipated rather than actual numbers of M/WBE subcontracts. Accordingly, this information cannot be used to accurately assess the actual results of the Department’s M/WBE program.
Audit Recommendations
This report makes a total of six recommendations. The Department should:
- Adequately monitor the actual participation of M/WBE prime contractors and subcontractors that were awarded contracts with M/WBE utilization goals.
- Develop written procedures to comply with the requirements of Local Law 129 to ensure that prime contractors are utilizing and paying M/WBE subcontractors.
- Ensure that contract files contain the names, addresses, or contact numbers of M/WBE subcontractors on the Subcontractor Information on Request for Payment forms.
- Ensure that contractors submit subcontractor lists in a timely manner.
- Ensure that all prime contractor and subcontractor complaints are investigated and followed up on in a timely manner.
- Establish controls to ensure that the information recorded in FMS pertaining to M/WBE anticipated subcontract amounts is accurate.
Agency Response
In its response, Department officials contended that they were already complying with five recommendations. For two of these recommendations (“Adequately monitor the actual participation of M/WBE prime contractors and subcontractors” and “ensure that contract files contain the names, addresses, or contact numbers of M/WBE subcontractors”), the Department agreed to implement additional compliance measures. The Department agreed with our recommendation to develop written procedures to comply with the requirements of Local Law 129.