Report for Fiscal Year 2012

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1 Anne Arundel County Public s Minority and Small Business Enterprise Utilization Report for Fiscal Year 2012 SUBMITTED BY: Kevin M. Maxwell, Ph.D. Superintendent of s Alex L. Szachnowicz Chief Operating Officer MBE Liaison Susan A. Bowen Director of Budget and Finance Esther A. Leslie Avery Financial Compliance Specialist

2 1. Mission & Purpose Statement The mission and purpose of the Minority Small Business Enterprise (MSBE) Office is to administer and conduct a minority and small business enterprise program for the delivery of services and products. Anne Arundel County Public s (AACPS) is committed to increasing the participation of minority and small business enterprises in providing goods and services to the school district. The use of a minority and small business enterprise program has an indirect impact on the educational outcomes of our students through improved economic conditions within the county. The success of the MSBE program supports a stronger community and better schools. 2. Executive Summary Anne Arundel County Public s is pleased to present the MSBE annual report for Fiscal Year In Fiscal Year 2012, AACPS achieved 32.72% MBE participation, while the statewide average was 25.95%. The MSBE program s main goals are to increase contract awards to minority and small businesses and to increase minority and small businesses participation in total expenditures. In Fiscal Year 2012, 30.50% ($10,726,123) of state-funded projects were awarded to Minority Business Enterprise (MBE) prime contractors and subcontractors. The 10-year historical trend shows a 47.45% increase in all construction and maintenance projects from Fiscal Year 2002 to Fiscal Year In Fiscal Year 2002, 43.54% of contract awards in this category were made to MBEs compared to 64.20% of awards in Fiscal Year The Compliance Monitoring Program continues to show contract compliance on MBE participation in construction and maintenance projects. 3. Accomplishments & Goals Fiscal Year 2012 Accomplishments Identified MSBE opportunities in non-construction areas where the historical percentage participation of MBEs is very low or non-existent. Developed relationships with pre-qualified Architects and Engineers in an effort to better understand the consulting arena and increase MBE participation. 2

3 Have met with the Division of Technology in developing a program system to fully automate the data collected by the MSBE Office. Fiscal Year 2013 Goals Expand training for vendors on the completion of MBE Forms Continue developing relationships with the Asian community Continue developing relationships with the Hispanic community Implement the Compliance Monitoring Program system (a technology solution to capture data and allow for enhanced analysis/reporting). 4. New Updates Blue to Section MBE Legislation/Requirements SUMMARY OF THE 2012 MBE PROGRAM REAUTHORIZATION LEGISLATION In 2011, Maryland s Minority Business Enterprise (MBE) Program statute, which typically sunsets every five years, was re-enacted for one year to give the state an opportunity to evaluate whether additional programmatic changes were warranted based on information from the 2011 Disparity Study. This one year extension also allowed the state to gather comments and recommendations for the MBE Program through a combination of outreach efforts and evaluation processes spearheaded by the Governor s Office of Minority Affairs (GOMA) and the Maryland Department of Transportation (MDOT). As a result of those efforts, the 2012 General Assembly passed an MBE Program statute that extends the program for four more years and includes the following key components: Reaffirms the requirement for an overall aspirational statewide MBE goal, but allows increased flexibility by requiring that GOMA, in consultation with MDOT and the Office of the Attorney General (OAG), reevaluate and set an overall goal every two years through the Code of Maryland Regulations (COMAR). Requires that GOMA, in consultation with MDOT and the OAG, reevaluate and update sub goal guidelines every two years. Requires that GOMA consult with MBE Program stakeholders in establishing overall goals and sub goal guidelines. Requires that for any year in which there is a delay in establishing an overall goal or sub goal guidelines, the previous year s overall goal or sub goal guidelines will apply. Emphasizes the existing prohibition against bundling contracts to inhibit MBE participation and adds a prohibition against quotas. Clarifies the requirement that state agencies monitor and collect data with respect to compliance and take corrective action when prime contractors do not make good faith efforts to comply with MBE contract goals. 3

4 Authorizes GOMA, in consultation with MDOT and the OAG, to issue regulations to govern how the work of MBE prime contractors might be counted toward contract goals. Requires that prime contractors provide a satisfactory reason for submitting an ineligible or unavailable MBE subcontractor before they will be permitted to amend an MBE Participation Schedule. Requires that an MBE Participation Schedule be made a part of the executed contract and prohibits replacement of a listed MBE firm after contract execution unless there is good cause and the change is approved by the head of the agency with the written consent of the MBE liaison. The new MBE Program statute not only extended the program until July 1, 2016, it added several provisions to further strengthen the effectiveness of the program in an effort to provide equal access to opportunities and address longstanding and persistent disparities. Taken together, the measures will continue to ensure that Maryland s MBE program is fair, flexible, and constitutional. 5. Analysis of Data and Contract Activity for Capital Projects MBE Goal-Setting Process for Capital and Maintenance Projects State regulations require Local Education Agencies (LEAs) to review and analyze the project or type of work and determine the potential for certified minority businesses to participate in the project. Based on historical participation and vendor availability factors, individual project goals are established on a case-by-case basis. Goals for capital and maintenance projects are based on at least three types of analysis: (1) A weighted average analysis is performed on data derived from the MDOT directory and the Department of Labor, Licensing and Regulations (DLLR) comparing the number of MBEs certified in a particular construction division with the number of total contractors by county. (2) Historical data of MBE achievement on similar projects. (3) Recommendations from the Director of Facilities; Supervisor of Facilities, Supervisor of Planning Design and Construction; construction managers; and purchasing buyers taking into account the economic conditions and other factors that may impact each of the analysis conducted in (1) and (2). The data from the MDOT directory and DLLR is important to monitor, since the information from many of these databases is fluid and can change on a daily basis. There are approximately 20 construction divisions used in these analyses. 4

5 State-Funded Projects During Fiscal Year 2012, the Capital Project Budget contained one new major statefunded project--the addition and revitalization of Phoenix Annapolis Center. The Procurement Review Committee established an MBE goal for this project using historical, accessibility and availability data to arrive at a realistic and achievable goal. Data was ascertained from MDOT, DLLR, and previous projects. The following data represents the result of the awarded bid: Table 1: State-Funded Major Capital Projects Name of Project Phoenix Annapolis Center MBE Goal % Sub Contractors Award % MBE Prime Contractor Award % Total % Total MBE Amount 26.68% 23.77% 12.55% 34.20% $4,251,598 We continue to see a trend of minority business enterprises competing for and being awarded as prime contractors. Three (3) of the twelve (12) prime contractors on the Phoenix Annapolis Center were MBE Certified. In Fiscal Year 2012, AACPS awarded state-funded projects totaling $35,162,421. Of the awarded state eligible projects, 10.07% ($3,539,649) were awarded to minority prime contractors and 24.16% ($8,494,288) were awarded to minority businesses in subcontracting opportunities, resulting in unduplicated awards to minority businesses of 30.50% ($10,726,123) in Fiscal Year Capital Project for Construction and Maintenance Table 2 provides a breakdown of total dollars awarded in Fiscal Year 2011 and Fiscal Year 2012 and also provides a breakdown of awards to subcontractors for capital and maintenance projects by MBE classification. The data below shows a 55% decrease in total awards for construction and maintenance contracts in Fiscal Year 2011 compared with Fiscal Year 2012, however MBE participation only decreased from 24.92% to 21.73%. It should also be noted that during a year of smaller award volumes and due to the process of awarding to the lowest responsible and responsive bidder, there is a tendency to see changes in the racial make-up of awardees from year to year. This can be attributed to the different variables present in the market for bidding capital and maintenance projects. 5

6 Table 2: Subcontractor Contract Awards by MSBE Classification for Construction and Maintenance Capital Projects FY12 MSBE Classification Construction % of Maintenance % of Total % of Total African- American $ 3,136, % $ 2,040, % $ 5,177, % Alaskan Native $ % $ % $ % Asian $ 827, % $ 505, % $ 1,333, % Native American $ 11, % $ % $ 11, % Women $ 1,657, % $ 1,489, % $ 3,147, % Hispanic American $ 476, % $ 123, % $ 599, % Disabled $ % $ % $ % Total MSBE $ 6,109, % $ 4,158, % $10,268, % Total $25,320,268 $ 21,936,220 $47,256,488 FY11 MSBE Classification Construction % of Maintenance % of Total % of Total African-American $ 6,900, % $ 33, % $ 6,933, % Alaskan Native $ % $ % $ % Asian $ 1,315, % $ % $ 1,315, % Native American $ 3,242, % $ % $ 3,242, % Women $ 12,791, % $ 449, % $ 13,240, % Hispanic American $ 1,188, % $ 49, % $ 1,238, % Disabled $ % $ % $ % Total MSBE $ 25,437, % $ 532, % $ 25,970, % Total $101,301,235 $ 2,928,910 $104,230,145 6

7 Graph 1 below shows the percentage of total dollars in Table 2 awarded by classifications. It should be noted that the largest percentage increase occurred for Asian and African American. The largest percentage decrease is Women. Graph 1: Percentage of Total by Classification Total Hispanic American Women Native American Asian African- American 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Total -FY 11 Total -FY Historical Year Trend 10-Year Historical Trend Trend data on the statistical changes that occurred over the past ten (10) years with regard to minority participation were reviewed. Table 3 below represents data comparing Fiscal Year 2002 with Fiscal Year This data reflects significant progress toward achieving the MBE goals. The Percentage of Total Construction and Maintenance to MBE primes and subcontractors has increased over the past ten (10) years by 47.45%. This can be attributed to many variables, including changes in the state MBE regulations as well as communications and partnerships between the prime contractors and subcontractors. Enhanced accountability and outreach efforts have also contributed to the increase. 7

8 Table 3: 10-Historical Year Trend Description FY2002 FY2012 Total $17,063,637 $47,256,488 Total MBE Prime $3,490,962 $20,067,960 Total to MBE Subcontracts $3,938,626 $10,268,749 MBE Prime and Subcontractor as a % of Total 43.54% 64.20% 7. Architectural and Engineering Services In Fiscal Year 2012 one of the main focuses of the MSBE Office was to increase the MBE participation in the Architectural and Engineering Services area. The MBE goal for these projects has historically been set at 15%. Even though these areas require specific specialties, there are sub-consulting opportunities in many of these projects. In January of Fiscal Year 2012, the MSBE Office conducted a survey with MBE consultants in an effort to gather their interest in working with AACPS. We also wanted to provide our pre-qualified Architects and Engineers with a list of MBE consultants who are interested in working with AACPS. The results of this survey generated a list of approximately seventy-two (72) MBE design consultants. After the survey was conducted, we invited the pre-qualified architects and engineers to a roundtable discussion of possible opportunities in this area and their willingness to work with MBE consultants. We wanted to know if the survey results would be helpful to them in their efforts to recruit MBE consultants, and if there were other suggestions they could provide us. The consensus among participants was that the meeting was a success and conversations will continue on increasing opportunities for MBEs. Table 4 represents MBE achievements in Architectural and Engineering projects comparing Fiscal Year 2011 to Fiscal Year Table 4: MBE Architects and Engineers Achievement Description FY 2011 FY 2011 Percentage of Total FY 2012 FY 2012 Percentage of Total MBE Architecture $ 200,190 13% $ 2,718,642 19% MBE Engineers $ 36,336 3% $ 128,572 6% Total MBE Architects and Engineers $ 236,526 8% $ 2,847,214 17% Total to Architect and Engineer Consultants $2,896,297 $16,505,295 8

9 8. Summary of MSBE Operating Expended The MSBE program seeks to provide opportunities for minority and small business enterprises to maximize participation fully and fairly in contracting within all sources of funding. The Board of Education set an MSBE goal of 15% for all non-construction related contracts for materials, supplies, equipment, and services. It should be recognized that there is significant spending in areas where competition is not available, including, but not limited to, textbooks, library books, utilities, water, sewage, proprietary software maintenance, and copiers. Even though there are other areas with large numbers of MSBE firms, due to our volume requirements and open competition, there is no guarantee of a contract award. Table 5 represents Fiscal Year 2012 expenditures with MSBE vendors. Operating dollar expenditures include, but are not limited to, technology hardware, furniture, office supplies, training, and service contracts. The data analysis performed below shows a slight decrease in Fiscal Year 2012 compared with Fiscal Year Work will continue with other departments within AACPS regarding MSBE initiatives to ensure they have a full understanding of the program. Table 5: Operating MSBE Expenditures Year Total Expenditures Operating MSBE Expenditures MSBE Operating Expenditures as a Percentage of Total Operating Expenditures FY 2012 $97,376,356 $8,142, % FY 2011 $89,504,938 $7,848, % 9. Small Business Program The Small Business Reserve Program, as defined by the Department of General Services, is a component of MSBE. For Fiscal Years 2011 and 2012, there were seventeen (17) small business owners who registered with AACPS that provided goods and/or services, of which nine (9) conducted business with the school system. As Table 6 shows, there was an increase in total expenditures in Fiscal Year 2012 as compared with Fiscal Year The increase is mainly due to the increase in service sectors. 9

10 Table 6: Small Business Program Summary Year # of Registered Small Business Receiving Awards Small Businesses Total Expenditures FY $396,538 FY $267, Compliance Monitoring Program The Compliance Monitoring Program ensures that prime contractors and subcontractors are adhering to the State of Maryland s MBE program requirements. The program includes reviewing financial transactions, conducting job site visits and document reviews, and interviewing primes and subcontractors to verify compliance with the MBE regulations. As a part of this review, any deviation from compliance standards is documented. If such deviations are not corrected, AACPS may sanction these contractors. The MSBE Administrative Procedures identify the sanctions that may be instituted in accordance with established Purchasing Policies and Regulations. Significant irregularities require further investigation and any suspected fraud will be forwarded to GOMA and MDOT for review. State-funded projects valued at $1,000,000 and above were randomly selected for compliance monitoring. Table 7 represents a summary of seven (7) monitored projects: Table 7: Compliance Monitoring Description Overlook Elementary Pershing Hill Elementary Southgate Elementary Oakwood Elementary Ridgeway Elementary Severn Elementary Waugh Chapel Elementary Project Costs Project Completion Date MBE Goal MBE Achieved in Contract $11,508, % 28.00% $12,945, % 24.00% $15,098, % 25.21% $1,235, % 29.00% $1,462, % 29.00% $1,595, % 23.00% $1,801, % 29.00% 10

11 Overlook, Pershing and Southgate elementary schools are all considered Construction and Major Renovation projects. In addition, Oakwood, Ridgeway, Severn and Waugh Chapel elementary schools were Pre-Kindergarten addition projects. We continue to work with prime contractors in the area of timely payments to MBE subcontractors. Many of the slow payments to MBE subcontractors are due to incomplete and inaccurate paperwork submitted by prime contractors and MBE sub-contractors. Project managers and construction managers continue to work with both in order to address this issue. Timely payments are vital to the life of MBE contractors, since most operate on very limited capital. 10. Outreach Activities The MSBE Office staff attended numerous events during the year in an effort to reach out to minority businesses, encouraging their participation in the bidding process and working collaboratively with AACPS. MSBE Office staff participated in the following outreach events in Fiscal Year 2012: Annual Baltimore/Washington Area Procurement Fair sponsored by Baltimore Washington Corridor Chamber Baltimore County Public s Meet the Primes Regional Construction Event held in Prince George s County MBE University in Howard County sponsored by the Governor s Office of Minority Affairs Blue Book Construction Network General Contractor/Purchasing Showcase at FedEx Field Meet & Greet Session sponsored by Baltimore County Public s Enhancing Small Business Enterprise Forum Asian American Business Conference Maryland Washington Minority Contractors Association 9 th Annual Spring Inclusion Breakfast and Expo Showcase 11

12 The MSBE Office is committed to working with the Purchasing Office to constantly refine our processes and procedures to encourage MSBEs to participate on contracts at a level that represents their availability in the industry. AACPS views the development of MSBE vendors as an important part of the continuing development of the community. Therefore, it is a continuing goal of AACPS to actively pursue MSBEs to take part in contracting activities. We will continue to work with MSBEs in an effort to encourage them to build partnerships and relationships with businesses their size or larger, which we believe is key to securing projects. It is further our intent to increase the ability of MSBEs to participate in the bidding process, resulting in widened opportunities, increased competition, and the proper, diligent use of public funds. If you should have questions concerning this report, please contact the MSBE Office at

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