Friday, February 03, 2012

Forest City doing worse on M/WBE contracting for Atlantic Yards than previously reported: ESD says total is 15.4%, not 22.6%, because some firms aren't certified

By the state's measure, developer Forest City Ratner has a much lower M/WBE (Minority and Women's Business Enterprises) utilization figure than previously reported, which suggests it's doing less than previously assumed in reaching out to businesses that truly need a boost.

On January 31, I reported that, according to statistics released by Empire State Development (ESD), the state agency overseeing Atlantic Yards, the MBE awards total $91 million (about 16.3% of total purchases), while the WBE awards total $35.1 million (about 6.3% of total purchases).

Thus the combined M/WBE participation is apparently 22.6%, about three-quarters of the way toward the goal of 30% (20% MBE plus 10% WBE), as reflected in the Community Benefits Agreement (CBA).

Revising the numbers

Well, that was  true, but I've since learned that the statistics, while released by ESD, were not only prepared by Forest City Ratner--there was no indication on the document--they do not represent the ESD's own analysis of M/WBE figures.

Arana Hankin, Director, Atlantic Yards Project for ESD, explained:
ESD and the Atlantic Yards Project have a certified MWBE utilization contract goal of 20%. Firms must use “best efforts” to meet that goal. If they have not met the goal they must show that they have used their best efforts to retain MWBE firms through outreach and solicitation. ESD has calculated that Forest City has awarded 15.4% to MWBE certified firms to date. ESD does not count the MWBE firms that are not certified. If non-certified firms were included the percentage would increase.
Why wouldn't they be certified? I speculate that either 1) they are/were too fledgling to bother or 2) are too large and prosperous to qualify under the state's newly narrowed rules aimed to exclude M/WBE firms that are very large or led by businesspeople who are so wealthy as to be clearly not disadvantaged.

Whatever the reason, the discrepancy again points out the need for Forest City to not merely self-report but to hire the Independent Compliance Monitor required by the CBA.

What are the M/WBE rules?

State rules passed in 2010 require:
All firms seeking MBE or WBE certification must be at least 51% owned, operated and controlled by minority members and/or women.
The ownership must be real, substantial and continuing, and the minority members and/or women must exercise the authority to independently control the day-to-day business decisions.
In addition, each minority or woman upon which certification is based, must have a net worth which does not exceed 3.5 million dollars. This calculation should not include the ownership interest in the applicant firm, the primary residence of the owner(s), and $500 thousand of present cash value of any qualified retirement savings plan, or individual retirement account held by the individual less any penalties for early withdrawal.
The firm cannot exceed 300 employees, must be independent and authorized to do business in New York State. Generally, the business must be in operation for at least one year.
Discomfort with the rules

The Albany Times-Union reported 1/15/12, in Wealthy minority and women business owners work to keep contract edge:
Several representatives of minority enterprises and at least one controlled by a woman have been working behind the scenes to get the Cuomo administration to support changes in a law signed by Gov. David Paterson shortly before he left office in 2010, according to several people interviewed.
The law sets a limit of $3.5 million in personal wealth. Minority- and Woman-owned Business Enterprise certification cannot be conferred by the state on companies whose principals have amassed net worth exceeding the figure.
Consultants, lawyers and lobbyists for some former MWBE-certified businesses are trying to get the law changed to raise the limit or grandfather their clients in, or to make other considerations that will maintain their status, according to people who have been involved in private talks.
The certifications give MWBE businesses an advantage over other firms for a share of public contracts. Cuomo has directed state agencies to boost MWBE participation in state contracts and procurements to 20 percent, more than double current levels.
Note that ESD had the 20% goal already.

It's not clear to me which companies working on Atlantic Yards no longer qualify. For example, the venerable McKissack Group, selected to manage railyard reconstruction (see press release at bottom),  remains in the directory; it does not employ more than 300 people but is presumably led by well-off leadership.

MWBE Contract Awards as of December 2011


McKissack Atlantic Yards Railyard Press Release October 2005

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