Two years after enacting improvements to the city’s often-criticized policy for helping minority businesses get a share of public contracts, the New Orleans City Council on Thursday approved additional policy safeguards devised to prevent abuse.
The action followed a New Orleans Advocate investigation into the practices of local construction giant Woodward Design + Build. That company hired minority subcontractors to meet a Housing Authority of New Orleans contracting requirement on the massive Iberville housing redevelopment. However, two of those firms in turn subcontracted most of their work to firms not owned by either minorities or women.
One firm, Nolmar Corp., subcontracted nearly a tenth of its contract back to Woodward itself.
A clause in the new rules, which were first unveiled at a public hearing last week, is aimed at preventing such a scenario. It requires subcontractors that are certified as disadvantaged business enterprises to perform at least 51 percent of the value of their subcontracts themselves. If the subcontractors pass on the rest of their work to outside firms, only those firms that are certified as DBEs will count toward the contract’s overall DBE participation goal.
The city’s DBE participation goal for all public spending is 35 percent.
Separately — in a move addressing contractor concerns about a lack of qualified DBEs in certain fields — the new rules say a construction review committee will assign specific DBE participation goals for each construction project, based on DBE availability.
Other notable rules include:
Rules for prime DBEs — A DBE can be a prime contractor and count as 100 percent of the contract’s participation goal, provided it has met the goal and performs at least a third of the contract work itself.
Who can count as a DBE — A prime contractor may count toward its contract goal only those DBE subcontractors that perform a commercially useful function. They may perform that task themselves or provide on-site supervision of another firm that is performing the task.
Required steps — Firms must submit DBE participation plans and a list of proposed DBE subcontractors they will use to meet their participation goals. If they don’t meet those goals, they must prove they have made “good faith efforts” to do so. If a proposed DBE ultimately isn’t used, a good-faith effort must be made to find another one.
Good-faith efforts — Requirements include detailing the work DBEs can perform and the estimated value of that work, notifying DBEs of subcontracting opportunities and sending rejected DBEs explanations for the rejection.
Consequences and monitoring — The city will reject any contractor that does not meet the DBE participation goals or prove it has made good-faith efforts to meet the goals. Firms must submit DBE utilization reports monthly, and the city will routinely audit payroll and other records.
As was the case at last week’s public hearing, Thursday’s council meeting heard few criticisms of the new regulations, which council members and speakers said have been needed for years.
Residents and contractors “can rely on a robust set of rules that will hopefully outlive us,” Councilman Jason Williams said.
However, at least one businesswoman is skeptical about how some of the rules will affect small firms.
Charlotte Burnell, of Metairie-based Strategic Planning Associates — one of the DBE firms recently rapped by HANO for subcontracting its work to firms not owned by minorities or women — lauded the city for issuing a defined policy.
She worried, though, that the new requirements might make it hard for her and other small firms to snag a share of big projects. Many small DBEs won’t be able to do most work alone, she said.
“Leaving it that you have to do 51 percent of the work yourself is going to continue to allow you to work to get small contracts. Because for a large contract, you will have to have subcontractors,” she said.
Follow Jessica Williams on Twitter, @jwilliamsNOLA.