Increased oversight of minority and women-owned businesses

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New York Governor Kathy Hochul has signed into law a set of three bills that will strengthen oversight of minority and women-owned businesses (MWBE) infrastructure in New York State (NYS). The first bill aims to prevent fraud and abuse in the MWBE program while creating a framework for a fraud investigation and verification fund. The second bill will allow companies to use funds from the MWBE development and loan program to refinance existing debts. The third bill, which may be the most impactful, allows New York City to award contracts of up to $1 million to MWBEs without a formal competitive process.

Prevention of Fraud and Abuse in NYS Contracts by Entities Falsely Claiming to be MWBEs (A.9259-A/S.3390-A)

This legislation aims to eradicate companies that fraudulently claim to be minority or women-owned. The NYS MWBE program aims to provide opportunities for minority and women-owned businesses to participate in state contracts by generally requiring that at least 30% of the work performed on such contracts be done by commercial companies in the NYS Division of Minority and Women’s Business Development has been certified as an MWBE. Fraudulent MWBEs harm legitimate MWBEs by taking work away from them and defeating the purpose of the program. In some cases, fraudulent “minority” companies were hired as fronts or intermediaries for non-MWBE companies that ultimately carried out the work. Additionally, a 2014 New York State Supreme Court grand jury report found that more than $10 million intended for honest MWBEs instead went to fraudulent non-MWBEs, misleading legitimate MWBEs. on contracts.

To increase liability and prevent fraud, this legislation imposes new regulatory requirements on MWBEs and state contractors, including i) requiring both the contractor and the MWBE to complete a post-completion certification, under penalty of perjury , that the MWBE performed the work, performed the services or delivered the materials; (ii) creation of a centralized and searchable State register containing all relevant documents, etc.; relating to contractor certification and performance; and (iii) directing the Director of Minority and Women’s Business Development Division to conduct inspections of MWBEs to root out fraud and abuse.

Use of MWBE Development and Lending Program Funds to Refinance Existing Debt Legislation (A.6420/S.571)

This legislation will allow businesses to use funds from the NYS Business Development and Loan Program to refinance existing debt. The goal is to expand access to credit for business owners beyond the use of high-interest credit cards.

Prior to this legislation, the Minority and Women Owned Business Development and Lending Program did not allow MWBEs to refinance their debt. Because MWBEs have traditionally experienced a lack of financial savings and reduced access to capital, commercial credit cards were (and continue to be) the first and only way to access credit, which often led at higher interest rates on debt. Combined with the additional challenges that COVID-19-enforced closures brought on at the height of the pandemic, MWBEs struggled to stay afloat, manage debt, and cover business expenses. Allowing businesses to refinance their debt under one of the state’s existing micro-loan programs could reduce interest payments and allow MWBEs to become more debt free.

NYC can now award contracts up to $1 million to MWBEs without a formal competitive process (A.10459/S.9351)

This legislation will allow NYC to double its individual award amounts to minority and women-owned businesses for non-competitive contracts from $500,000 to $1 million. This change, advanced by NYC Mayor Eric Adams, creates opportunities and increases access to capital for MWBEs to enter into contracts with NYC. Awarding higher value contracts to MBWEs through this non-competitive process can help demonstrate and increase the capacity of MWBEs to handle larger contracts and create better opportunities when vying for competitive solicitations. traditional. Although it is now NYS law, NYC has yet to announce the implementation process.

Concurrent with the Governor’s signing of the aforementioned legislation, she announced that NYS MWBE utilization rates were the highest in the nation for two consecutive years. These new laws are expected to help further strengthen New York’s MWBE community.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 285

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