Becoming a Minority- or Women-owned Business Enterprise in New York state requires more than just having a woman own a majority share of the business.
Just ask Jennifer Kavney Harvey, an attorney specializing in construction law at Couch White, LLC, in Albany. About a third of her practice focuses on minority and women-owned business enterprises (MWBEs) from the perspectives of the MWBEs and the contractors that hire them.
MWBEs and certification
“Certification is a very granular task and a company seeking certification must go through an extensive process in order to get certified, including providing a whole host of information,” Harvey said. “It’s a vast amount of data that, I think, a lot of people don’t expect when they consider applying. Once a potential MWBE starts the process, many find it extremely overwhelming. For example, they must prepare detailed resumes for themselves, for the owners, for all the key people in the company and submit those. It’s tax returns. It’s vehicle registrations. It’s leases. It’s really quite an avalanche of paper.”
The process can also be extremely lengthy. State regulations presently say that any applicants are to be provided with notice of any deficiencies in an application within 21 days of submission and that all applications will be processed within 45 days of submission of a final completed application. But in reality, the volume of applications and the apparent lack of adequate staffing are such that it takes as much as two years for a submitted MWBE application to even be assigned an analyst.
From there, the process is no less rigorous. What comes next is an interview, typically by phone, with the business owners where the analyst from the Division of Minority and Women’s Business Development, within Empire State Development, go over the application with a fine-tooth comb.
“For example, I had one WBE applicant that did office supply fitups, and the questions that they were asking her were pretty specific,” Harvey said. “The person from the Division really had a good working knowledge of her industry. ‘What lines do you carry? Are you a distributor?’ Very, very specific questions that were technical and appropriate to understanding whether the applicant had good knowledge of the area in which she was seeking certification.”
Harvey said it’s imperative that applicants have a good understanding of the technical side of their business and the ability to assess cost estimates on projects. She always advises clients to take courses in whatever segment of the industry they’re in, including estimating or blueprint reading, when they are preparing to apply for certification.
Harvey said people often come to her after they’ve had their application denied.
“It gets tricky from there,” she said. “Although a denial can be appealed, you can’t reapply for two years after a denial under the regulations.”
However, if there’s been a change in circumstances since the original application that corrects the issues raised in the denial — for example, one applicant was denied because of an issue with the company’s bylaws, and following the denial the bylaws were amended to address and correct the issue — the applicant can get around the two-year waiting period and resubmit early with the permission of the Division.
“If the reasons for the denial are address, the Division will typically grant a request to reapply early based on changed circumstances,” Harvey said. “And it’s possible to do that and get approved, too, actually, quite quickly, because they’ve just looked at your application.”
But Harvey said she prefers it when clients come to her when they’re just starting the process.
“I enjoy it when folks come in and they talk to me about, ‘Oh, do you think that my business would work as an MWBE as a certified entity?’ And we talk about it,” she said. “It’s a better approach to start with a strong application from the beginning as opposed to trying to repair it after denial.”
Contractors and MWBEs
Harvey said about a third of her practice centers around MWBEs. About half of those clients are contractors who work with MWBEs and are struggling with subcontractor and supplier goal issues, including waivers. She said this is a very specific and often tricky area of law.
“For example, did you know that contractors are often expected to pay a premium to an MWBE subcontractor over a quote from a non-MWBE?” she said. “That’s one of the challenges. What will happen is that a contractor will get a quote from MWBE that might be, perhaps 30 percent higher than the quote from a non-MWBE, and they have to assess whether that markup is excessive or commercially unreasonable… and if they guess wrong, they could be subject to some extremely severe penalties.”
Harvey’s job is to help contractors create and implement MWBE policies to ensure compliance. She said she’s provided guidance for a number of contractors of varying sizes, as well as training for administrators, estimators and project managers.
“That’s rewarding,” she said. “I enjoy doing that because I feel it’s protective to contractors and avoids issues.”
A changeable industry
One of Harvey’s biggest responsibilities as an attorney is to keep track of changes in legislation, to be able to advise trade associations and individual clients.
“This is really a rapidly changing part of the construction industry,” she said. “There were a number of changes in the statute that went into effect last month. But it’s also changeable because the guidance changes, and once the guidance to the state agencies changes, everything can change, so there’s a lot a lot to watch here.”
In the recent round of changes, New York state is trying to cut some of the red tape in order to streamline the application process. They’ve also changed the recertification process so that MWBEs can go five years between recertifications instead of three, which helps cut down on paperwork and stabilizes the status of MWBEs.
“That doesn’t sound like a big deal, but it’s huge for both MWBEs and the contractors who subcontract with them,” Harvey said.
But in recent months, Harvey said she’s seen more and more businesses that had been certified, in some cases for many years, as WBEs being denied when they go to get that recertification.
“And they’re not being decertified for some new circumstance, they’re being decertified because it looks like the department is like reaching back to their original certification which may have been from many years prior,” she said.
“To my mind, that’s going to be an industry problem at some point,” she said. “Legally from my standpoint, I think it’s very arbitrary and capricious for the department to reach back, especially to something that doesn’t form a part of the recertification application, and to make a different determination without some sort of change in circumstances or facts that rides along with that.”
Harvey said the trend could discourage people from applying in the first place.
“I’ve spoken with a number people that are qualified to be certified and aren’t being certified because they feel that the program is too much hassle and introduces other risks that they just don’t want any a part of,” she said. “And that’s kind of disappointing in a way because I know of contractors who are struggling to meet their goals and the more folks we have that are in the directory that are available and capable of performing the work, the better it is for everyone.”
Civil rights compliance
Harvey doesn’t just focus on MWBEs. Since a lot of her clients are heavy highway contractors and work with state and municipal agencies, she does a lot of work in civil rights compliance, which is particularly required by the federal government. She said this is an area in which contractors need to keep meticulous records.
“It’s enormously important, because it’s a true audit,” Harvey said. “The representatives from the public letting agency come on the job site.”
And those representatives, she said, will want to see project bulletin boards, subcontracts, hiring notices and records, policies and notices. So that they can ensure that equal employment and affirmative action requirements have been met during the project.
“For example, they may say, ‘You hired six people for this project. And all of them are males,’” Harvey said. “’Did your hiring notices contain proper EEO language? Did you have any female applicants? And why didn’t you hire them?’ Things like that.’”
Harvey said contractors should be keeping track not only of who they hire, but who they don’t and why.
“It’s really easy if you have the data and compliant policies in place that are being followed. It is really hard, if not impossible, if you don’t,” she said. “Things like that are becoming increasingly more important from a defensive operational standpoint just because it’s strategically necessary to have complete project documentation. You may not need it. But if you do, boy, you’ve saved yourself some time and effort.”
MWBE and small business
“One of the really interesting things about New York’s procurement policies in general is this longstanding goal of integrating small business and allowing it to participate in the huge amount of government procurement that goes on,” she said. “So it’s not it just these enormous companies. State procurement is supposed to also be inclusive of local, smaller companies, and to my mind the MWBEs, are a special category of those companies to a large extent.”
The use of MWBE goals on a large heavy-highway contract will result in subcontracting and supplier purchases from MWBEs that would not otherwise exist, but for the goals.
While the MWBE program is not perfect, Harvey said it’s a valuable program.
“I think everyone agrees that the program is a good one and it’s helpful for society,” she said. “It’s just a question of how best to implement it, and most effectively to properly implement it to achieve the goals that the program supposed to be achieving.”
Harvey said she hopes some of the changes that went into effect this year will make the application process less cumbersome for businesses.
“I feel like the program is morphing,” she said. “I’m hopeful that it’s improving. Hopefully we’re going to see improvements in terms of processing time and consistent procedures going forward that will alleviate the frustration that many applicants feel. It just takes time and patience.”
