Tuesday, August 11, 2009

Prince George's Fixation with WSSC Minority Contracting Never Ends

In the past, we have chronicled how the Prince George’s County WSSC Commissioners’ obsession with minority contracting has distracted them from the agency's serious capital problems. That fixation extends far beyond the Commissioners. Even though Commissioner Juanita “Wild Child” Miller is on the way out, Delegate Aisha Braveboy (D-25) stepped up by sending the following five-page letter on minority contracting to new WSSC Chairman Gene Counihan. If only Delegate Braveboy and the rest of the Prince George's County political establishment were equally focused on fixing pipes. Have they forgotten the former WSSC General Manager’s warning that bursting pipes could explode like “a missile?”

August 4, 2009

Gene W. Counihan, Chairman
Washington Suburban Sanitary Commission
14501 Sweitzer Lane
Laurel, Maryland 20707-5902

RE: WSSC’s MBE Program

Dear Chairman Counihan:

Thank you and your colleagues, Commissioners Joyce Starks and Juanita Miller for attending the special meeting of the Prince George’s County Bi-County Committee on Water, Sewer and Infrastructure on June 27, 2009. The meeting was convened to discuss the two proposals pending before the Commission for a revised Minority Business Enterprise (MBE) Program at WSSC and to provide legislative guidance as to the purpose and intent of the legislature in creating WSSC’s MBE program. At the meeting, legislators heard from a number of stake holders including the Director of Minority Business Enterprise for the Maryland Department of Transportation (MDOT), senior staff from WSSC, as well as members of the minority business community, including both the African American and Hispanic Chambers of Commerce, the MD/DC Minority Supplier Development Council, and the Maryland Washington Minority Contractor’s Association some of whom are members of MDOTs Advisory Committee.

The legislature created the MBE program for the WSSC to remedy the lingering effects of past discrimination. In 2007, the legislature adopted HB 691 which reauthorized the MBE Program and established new criteria for the program. Article 29, Title 3, Subtitle 1, Sections 3-102 and 3-109 of the Maryland State Code requires the WSSC to establish a MBE program to facilitate the participation of responsible certified minority businesses for certain goods and services. Most notably, Section 3-102 (F) (2) of HB 691, which covers construction contracts, requires WSSC, by resolution and by regulations to:

“Establish a mandatory Minority Business Utilization Program to facilitate the participation of responsible certified Minority Business Enterprises in contracts awarded by the WSSC in accordance with competitive bidding or proposal procedures.”

Further, Section 3-109(B)(1) requires the WSSC, “by resolution and by adopting regulations to establish a minority business utilization program to facilitate the participation of responsible certified minority business enterprises in contracts awarded by the WSSC for goods and services not covered by § 3-102.”

WSSC’s 2005 disparity study conducted by BBC Research & Consulting and MGT of America, Inc., reported certain findings, which established a strong factual predicate for the continuation of a race-conscious MBE program. The findings include:

A. Discrimination has affected the relevant marketplace and WSSC in the past.
B. There is evidence of ongoing effects of past discrimination in the local marketplace and in the purchase of WSSC goods and services.
C. There is contemporary evidence of discrimination against minority- and women-owned firms in the relevant marketplace
D. The evidence indicated that some prime contractors that are doing business with the WSSC discriminated against MBE subcontractors.
E. There is strong evidence that certain manufacturers favor and collude with existing non-minority authorized deals and distributors for the purpose of preventing the entry of prospective MBE distributors and further marginalize the growth of prospective MBE suppliers by discriminating in the terms of distributorship agreements that are awarded to MBE suppliers that sell to the Commission.

These findings support the establishment of an aggressive MBE program to address the past and present discriminatory practices in the marketplace. M y colleagues and I analyzed the Interim General Manager (IGM) Proposed MBE Program and discovered that the proposed MBE Program endorsed by the IGM appears to take the least assertive approach to address the documented (both statistical and anecdotal) evidence of discrimination and does not meet statutory requirements of HB 691 and Article 29. Below I have highlighted our areas of concern:

• The Affirmative Action initiatives proposed by the IGM does not adequately address the findings of discrimination contained in the 2005 Disparity Study. For example, the study found “strong evidence” of collusion and discrimination in the distributorship community, yet the IGM’s proposed Affirmative Action Initiative is a voluntary minority distributorship program, whereby manufacturers or franchisors would be provided with certain “incentives” to award a franchise of distributorship to an MBE. The incentives identified in the IGM’s proposal are (a) extended contract option years and/or (b) accelerated payment programs. First, extended contract option years are typically provided for in agreements for the purchase of goods by government agencies and may not have the effect of encouraging manufacturers to do business with MBEs. Further, when queried at the meeting about the accelerated payment program, the WSSC staff said that program would consist of payments being made on a 15 day cycle, as opposed to a 25 day cycle. While there may be some modest benefits to this accelerated payment initiative, it certainly does not go far enough to address the latent discrimination and collusion found in the marketplace.

• The IGMs proposal to discontinue race- and gender-conscious subcontracting goals in most areas of goods and services appears to be inconsistent with statutory requirements. Section 3-109(C)(3) of Article 29, states that the WSSC must provide for minority business participation through subcontracting. Second, the IGM’s proposal proposes to use a Small Local Business Enterprise (SLBE) Program instead of MBE goals to address barriers to MBE participation ignores the discrimination based on race and gender found in the study. The Director of Minority Business Development Division for the MDOT that the State uses both MBE subcontracting goals and a Small Business Reserve Program to address discrimination in the marketplace, while meeting the constitutional requirements for a race-conscious program. Therefore, the WSSC should strongly consider using this model for meeting its MBE subcontracting requirements.

• The IGMs proposal does not contain a Sheltered Market Program for MBEs, as required by Statute. Section 3-109(C)(5) of Article 29 provides for the establishment of a sheltered market program for MBEs. While race-neutral programs must be considered before establishing utilizing the MBE Sheltered Market Program, the program must provide for such an initiative. Further, it seems clear from the data of the disparity study that small business programs, which have been in place at the WSSC, will not alone address the issues of MBE utilization. For example, of the nine law firms receiving payments over $100,000 in payments, only one was reported to be an MBE, which reportedly received $200,000 in payments. Further in the area of business services, only one MBE firm is reportedly receiving over $500,000 in contracts, which amounts to less than 10% of the total dollars awarded; in the area of plumbing, heating and electrical supply, only one MBE firm received over $500,000 in payments.

• The IGM’s proposal creates both a voluntary and mandatory MBE subcontracting goals for construction contracts, which is inconsistent with statutory requirements. Section 3-102 requires a mandatory Minority Business Utilization Program to facilitate the participation in construction contracts. Having both voluntary and mandatory programs may be confusing for staff who are charged with implementing the programs and for contractors who must meet the requirements. Further devising and implementing a voluntary program conflicts with the intent of the legislature and plain language of Section 3-102.

Other areas of concern, include, but are not limited to the following:
1. There does not appear to be any numerical goals by which to measure performance of the agency.
2. The language does not appear to target MBEs in Montgomery and Prince Georg’s County as required by Section 3-109 (c)(8) of Article 29, requiring Montgomery County businesses and Prince George's County businesses to each have a targeted percentage of at least 40% of any contracts.
3. Many provisions and terms contained in the proposal were ambiguous and staff was unable to explain how they would be interpreted or implemented.
4. The Director of the Officer of Small Local and Disadvantaged Business Enterprise says that implementing this new program would be an “arduous” task.
5. The MBE community did not participate in the development of the proposed program.
6. There is no consensus among Commissioners for this program and the Commission has never adopted the recommendations of the2005 Disparity Study upon which this proposal was based.

My colleagues and I analyzed Commissioner Starks’s Proposed MBE Program and discovered that the proposal is a revision of WSSC’s 1996 MBE Program and meets minimum statutory requirements contained in HB 691 and provided for under Article 29 Section 3-102 and 3-109. The proposal more aggressively addresses the findings contained in the 2005 Disparity Study. Further, it is more consistent with the State’s MBE program in that it establishes measureable contracting goals and mandates MBE participation in construction contracting.

There were concerns raised by your staff about the constitutionality of the Starks proposal. They stated that their consultant advised that this proposal may not meet constitutional scrutiny. We have not received a legal opinion supporting that conclusion. On the contrary, Ms. Starks testified that she employed the services of constitutional law experts from the University of Maryland in developing the program. However, I think the issue of constitutionality should be addressed by the legal experts from the University of Maryland before the full Commission and they should be required to provide a written legal opinion addressing the constitutional concerns.

Based on the findings above, we recommend the following:

A. Reject the IGM’s Proposal. Based on the findings above, there is strong opposition in the legislature for the adoption of the IGM’s proposed program. The program does not adequately address the findings of discrimination found in the 2005 Disparity Study and does not fully meet statutory requirements mandated by the Legislature.

B. Work towards the adoption of a program more consistent with the Starks Proposal. This strategy is advisable for the following reasons:

1. Mr. Chairman, you testified at the hearing that any program established at this point would be a two-year interim program. Since your staff stated that implementation of the IGM’s proposal would be “arduous” and that it would take a long time to train and educate staff, a program more consistent with the existing MBE program is advisable.
2. The MBE community testified that they had input into the development of the Starks proposal.
3. The proposal appears to meet the statutory requirements of the Legislature.
4. The proposal is a revision of the existing MBE program and will be easier to implement.
5. The proposal is more consistent with the State’s MBE program and those of other local jurisdictions in the relevant marketplace.

C. Obtain a legal opinion from the University of Maryland consultants before moving forward to implementing changes to the existing program.

D. Give the new General Manger an opportunity to provide input into the new program.

E. Get input from State and County MBE Offices.

During this process, you may find that additional changes need to be made to the Starks proposal. In the meantime, I recommend that Commission extend the existing program for 120-days while this deliberative process continues.

Mr. Chair, I appreciate your recognition of the Legislature’s role in the oversight of WSSC’s operations, including the MBE program. Further, I applaud your recognition of the need for a new disparity study and your plans to endorse the funding for a new program in this year’s budget so that the program can continue into the future. Lastly, I thank you for your time and your commitment to ensuring fairness and inclusion in WSSC’s contracting process.


Aisha N. Braveboy, Esq., Chair
Bi-County Committee on Water, Sewer and Infrastructure

WSSC Commissioners
The Honorable Donna Edwards, Congressional District 4
Prince George’s Delegation
Montgomery County Delegation
The Honorable Jack B. Johnson, Prince George’s County Executive
The Honorable Isaiah Leggett, Montgomery County Executive
MD/DC Minority Supplier Development Council
MD Washington Minority Contractors Association
African American Chamber of Commerce of Montgomery County
Hispanic Chamber of Commerce for Montgomery County
Minority Business Enterprise Community